Executive Summary

 

Inventory & Price Outlook

The Malaysian Palm Oil Board (MPOB) reported that closing stocks climbed to 2.03 million metric tons (t) in June, the heaviest carry‑over in 18 months and roughly 18 percent above the five‑year June average. The increase came even though field output softened for a third straight month. Cargo surveyors attribute part of the build‑up to Eid‑holiday downtime at domestic refineries, which slowed offtake just as growers completed peak replanting rounds.

 

Price action has been muted. The benchmark September 2025 crude palm oil (CPO) contract on Bursa Malaysia traded between 4,100 and 4,300 ringgit per t throughout late July, a band traders call a “holding pattern” until clearer production signals emerge. Analysts at Maybank Investment Bank expect better worker availability and maturing replanted acreage to lift national output by 5 to 6 percent y‑o‑y through September and October, reproducing the cyclical high recorded in 2023.

 

Weather models offer few surprises. NOAA keeps the Equatorial Pacific officially neutral and assigns only a one‑in‑three chance of a weak La Niña by Q4 2025. Planters therefore anticipate broadly average rainfall during the critical pollination window, limiting weather‑driven rallies for now.

 

Trade Flow Shifts

Demand signals are balanced. In a tactical move, Indian refiners booked 150,000 t of crude soybean oil from Chinese crushers for September–December arrival, lured by a USD 15–20 per t discount to South American cargoes and by voyages that are two to three weeks shorter from Chinese ports. Market veterans emphasize that palm’s oxidative stability still makes it indispensable for deep‑fried snacks as India approaches its autumn festival season, so most desks view the soybean purchase as a tactical hedge rather than a lasting pivot.

 

Elsewhere, Middle‑Eastern buyers remain active, aided by competitive free‑on‑board (FOB) offers from Malaysia following the ringgit’s recent weakness. Refiners in Pakistan and Bangladesh have also returned after drawing down inventories accumulated earlier in the year.

 

Freight & Policy Watch

Logistics continue to cap outright exports. Container and break‑bulk carriers are detouring around the Cape of Good Hope to avoid the tense Red Sea corridor, adding 10–14 days to Asia‑Europe voyages. The Freightos Baltic Daily Index places Asia–North Europe spot rates near USD 3,560 per forty‑foot equivalent unit (FEU), roughly 4× last year’s average. Charterers report premiums of up to USD 25 per t on bulk vegetable‑oil tankers loading for the Mediterranean, eroding the cost advantage palm normally enjoys over sunflower and rapeseed oils.

 

Policy variables add more uncertainty. Indonesia has kept its domestic market obligation (DMO) at 1 : 6 through August, channeling additional crude into the export pool and offsetting part of Malaysia’s tightness. Export levies remain USD 85 per t for CPO, but traders will watch for a possible cut if Jakarta’s reference price falls below USD 870 per t next month. Meanwhile, the ringgit has slipped about 2 percent against the U.S. dollar in July, cushioning Malaysian offers and keeping Asia‑based buyers engaged.