PALMOILMAGAZINE, KUALA LUMPUR — Malaysia’s palm oil industry is breathing a sigh of relief after the United States exempted the commodity from a proposed 19% import tariff, a move widely seen as a timely boost for a sector that has managed to stay resilient in 2025 despite weakening global demand and elevated inventories.
The exemption has eased pressure on Malaysia’s flagship export, which has faced mounting external headwinds this year. Writing for Bernama, analyst Danni Haizal Danial Donald said the policy relief provides “significant breathing space” for the national palm oil sector, which has remained relatively stable amid global uncertainty.
Crude palm oil (CPO) prices averaged RM4,089.50 per tonne in November 2025, down from RM5,011.50 per tonne in the same month a year earlier. By December 10, CPO was trading at around RM4,000 per tonne. Even so, price prospects are still viewed as constructive.
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“CPO prices are expected to be higher in early next year and could potentially reach around RM4,500 per tonne,” Danni Haizal wrote.
On the trade front, Malaysia’s palm oil exports have been largely stagnant. In the first 11 months of 2025, export volumes totaled 22.55 million tonnes valued at RM103.01 billion, below the full-year 2024 performance of 26.66 million tonnes worth RM109.39 billion.
Despite these challenges, palm oil remains Malaysia’s largest export commodity and a key pillar of the country’s commodity sector. Plantation productivity has continued to improve, with fresh fruit bunch (FFB) yields rising to 14.45 tonnes per hectare in January–October 2025, up from 13.96 tonnes per hectare in the same period last year.
However, higher output has been offset by softer external demand, rising domestic stockpiles, and increasingly stringent sustainability requirements in major markets, particularly China.
“Buyers in key markets, especially China, have tended to switch to cheaper alternatives such as soybean oil,” Danni Haizal noted, adding that this shift has constrained Malaysia’s export performance.
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Weak global demand has contributed to a buildup of domestic inventories, with palm oil stocks surging to over 2.7 million tonnes— the highest level in more than six years.
“The spike in domestic inventories reflects an imbalance between strong production and slowing overseas purchases,” Bernama reported.
At the same time, palm oil’s relatively high price has weighed on shipments to major markets. Exports to China, in particular, fell sharply by nearly 30% in the first 10 months of 2025, as buyers increasingly turned to competing vegetable oils.
This imbalance has continued to cap CPO price gains, limiting upside potential despite supportive market fundamentals in the first half of the year.
On the domestic policy front, there was positive news for smallholders in Malaysia’s 2026 Budget. The government has allocated nearly RM2.4 billion to protect more than 720,000 settlers, smallholders, and their families under FELDA, RISDA, and FELCRA.
“The allocation aims to modernize agribusiness and strengthen support for smallholders,” Danni Haizal wrote.
In addition, around RM20 million has been earmarked to support startups developing mechanization and automation products, in collaboration with the Malaysian Palm Oil Board and major palm oil companies.
“This initiative is expected to reduce dependence on foreign labor while fostering local innovation,” the report said.
Looking ahead, Malaysia’s palm oil sector is expected to maintain solid prospects despite intensifying global competition.
“CPO prices could trend higher toward RM4,500 per tonne in 2026,” Danni Haizal Danial Donald wrote, citing stable import demand ahead of the Lunar New Year and Ramadan, as well as policy uncertainty in Indonesia that continues to underpin palm oil prices. (P2)
