Malaysian Palm Oil Futures: Navigating Currency Crosscurrents and Policy Shifts in a Volatile Market

The Malaysian palm oil market in June 2025 is a microcosm of global commodity volatility, where currency swings, geopolitical policies, and supply-demand dynamics collide. With prices hovering near seven-month lows but showing signs of resilience, investors must parse these crosscurrents to identify opportunities. Here's how to decode the market's next moves.

The MYR: A Double-Edged Sword for Palm Oil Prices

The Malaysian Ringgit (MYR) has emerged as a pivotal driver of palm oil futures. Its depreciation to 4.20 MYR/USD by mid-June 2025 has made Malaysian crude palm oil (CPO) cheaper for global buyers, lifting prices to RM3,909/ton from earlier lows. This currency advantage is expected to widen further if the MYR weakens to 4.23 by year-end, potentially pushing Malaysian CPO prices above those of Indonesian rivals.

However, the MYR's trajectory is far from certain. A rebound in the currency—driven by stronger oil prices or central bank intervention—could reverse this trend. will be critical to monitor, as a 10% MYR appreciation could erase Malaysia's cost edge.

Supply Glut vs. Demand Catalysts: A Delicate Balance

Malaysia's palm oil inventories hit a record 1.87 million tons in April 2025, up 19.4% year-on-year, reflecting a post-flood production surge. This oversupply has kept prices range-bound between RM3,750–4,050/ton, but two demand factors are countering this pressure:

1. India's Duty Cuts: A reduction in import duties to 16.5% has reignited demand, with June imports projected to jump to 750,000 tons—a 77% increase from March. This shift makes Malaysian CPO 30–40% cheaper than soybean oil for Indian refiners.
2. Biodiesel Mandates: Malaysia's B10 and Indonesia's B40 policies are diverting 2 million tons of CPO annually from export markets, tightening global supply.

Yet, the POGO spread (the price difference between palm oil and soybean oil) must widen beyond its current $165/MT to justify palm oil's use in biodiesel. If it narrows further, the sector risks losing its cost advantage.

Technical Levels and Volatility Drivers

Prices are currently testing critical technical thresholds. A sustained breach of RM4,200/ton (seen in May) could signal a rally toward RM4,500/ton by year-end. Conversely, a drop below the 200-day moving average (RM3,900) might trigger a decline to RM3,565/ton by 2025's close.

Export data will be a real-time indicator: May shipments rose 13.2–17.9% year-on-year, but China's restocking (accounting for 10% of exports) and Indonesia's policies could disrupt this momentum.

The Sustainability Wildcard

Long-term investors face a stark challenge: only 86.5% of Malaysian plantations meet the MSPO certification required for EU market access under the EU Deforestation Regulation (EUDR). Failing to hit the 95% target by 2025 could exclude Malaysia from EU premium markets, eroding revenue by an estimated $500 million annually.

Investment Strategy: A Three-Pronged Approach

1. Near-Term (1–3 Months):
2. Buy the Dip: Enter long positions at RM3,800/ton if the MYR weakens to 4.25, targeting RM4,000/ton. Use stop-losses below RM3,700 to mitigate inventory risks.

3. Monitor India's June-July Imports: Track shipments toward 850,000 tons/month and biodiesel adoption rates.

4. Medium-Term (3–6 Months):

5. Beware Overproduction: Sabah's output drop (if sustained) could limit supply growth, but a 21.5% production surge in April warns of oversupply risks.

6. Watch the POGO Spread: A widening gap beyond $200/MT would validate palm oil's biodiesel viability.

7. Long-Term (1–2 Years):

8. Sustainability Plays: Back firms pursuing MSPO 2.0 certification to secure EU access.
9. Geopolitical Diversification: Consider Indonesian CPO futures despite Jakarta's policy volatility.

Conclusion: A Volatile Equilibrium

Malaysian palm oil futures are caught in a tug-of-war between currency tailwinds and supply pressures, with demand catalysts like India's duty cuts and biodiesel mandates offering a floor. Investors must balance short-term agility—leveraging technical signals and MYR movements—with long-term bets on sustainability compliance. In this market, patience and adaptability are as critical as the data.