Palm Oil Futures: Navigating Currency Volatility and Competitive Oil Markets in 2025

Malaysian palm oil futures are caught in a tug-of-war between currency volatility and global commodity dynamics. As the Malaysian Ringgit (MYR) fluctuates against the U.S. Dollar (USD), the cost competitiveness of palm oil shifts, directly impacting export volumes and pricing. Meanwhile, rival oils like soybean oil and rapeseed oil vie for market share, complicating the outlook. This analysis explores how currency movements and competitive pressures shape palm oil's trajectory—and where investors should position themselves.

The MYR/USD Exchange Rate: A Double-Edged Sword

The MYR's value relative to the USD is the single most influential factor for Malaysian palm oil exports. A weaker MYR (higher USD/MYR rate) reduces the cost of palm oil for dollar-paying buyers, such as India and China, boosting demand. Conversely, a stronger MYR erodes this advantage, making Malaysian oil more expensive compared to rivals.

As of July 7, 2025, the USD/MYR rate stood at 4.23, down slightly from its early July peak of 4.38 (reached on July 1). This decline reflects a modest MYR strengthening, which could pressure palm oil prices if sustained. However, the currency's broader 2025 trend has been volatile, with the MYR averaging 4.25 USD/MYR year-to-date.

Key Levels to Watch:
- Resistance at 4.50 USD/MYR: A sustained breach could trigger a RM200/ton price surge in palm oil futures, as exports boom and dollar buyers snap up discounted oil.
- Support at 4.40 USD/MYR: A drop below this level would signal MYR strength, squeezing export competitiveness and potentially pushing prices toward the 18-month low of RM3,849/ton.

Competing Oils: Soybean Oil's Shadow

Palm oil's price is heavily influenced by its rivals. Soybean oil, for instance, is tied to U.S. soybean production and crude oil prices. When crude rises, biofuels become more attractive, lifting demand for soybean oil—a dynamic that can displace palm oil.

• POGO Spread: The Palm Oil – Crude Oil (POGO) spread—measuring palm oil's price relative to crude—has narrowed to -RM100/ton, signaling overvaluation compared to crude-linked oils. A positive POGO (above RM50/ton) would favor palm oil, but current conditions suggest weakness.
• U.S. Soybean Supply: A bumper 2025 harvest in the U.S., driven by favorable weather and high planting rates, could depress soybean oil prices, further pressuring palm oil's margins.

Structural Risks: Indonesia's B40 and EU Regulations

Beyond currency and competition, structural factors loom large:

1. Indonesia's B40 Mandate: By diverting 2 million tons of palm oil annually to domestic biodiesel, Indonesia has tightened global supplies, supporting prices. However, Malaysia's aging plantations (30% over 25 years old) and sustainability compliance costs (targeting 95% certified by 2026) threaten long-term output.
2. EU Deforestation Rules: Effective late 2025, the EU's ban on commodities linked to deforestation will force Malaysian producers to invest in traceability systems, raising costs and potentially limiting exports.

Technical Outlook: Key Levels Define the Path

Technical analysis highlights critical price zones for palm oil futures:

• Near-Term Support: RM4,008–4,032/ton. A breakdown here risks a collapse to RM3,849/ton, the 18-month low.
• Resistance: RM4,113–4,260/ton. A breakout could revive bullish momentum, targeting RM4,500/ton by year-end if crude prices rise above $75/barrel.

Investment Strategy: Positioning for Volatility

1. Bullish Scenario (MYR Weakness):
2. Go Long: Buy palm oil futures near RM4,000/ton, aiming for RM4,200/ton. Pair this with a USD/MYR call option (targeting a rate above 4.50) to hedge against further MYR depreciation.

3. Watch: Crude oil prices and Indonesia's biodiesel policy—both could amplify price gains.

4. Bearish Scenario (MYR Strength):

5. Short Palm Oil: Target RM3,950/ton, with a stop-loss above RM4,050/ton. Pair with a USD/MYR put option (below 4.40) to capitalize on MYR appreciation.

6. Hedge: Use soybean oil futures as a partial offset if crude prices weaken.

7. Neutral Strategy:

8. Range Trade: Sell at RM4,150/ton and buy at RM3,950/ton, exploiting the RM200/ton volatility band.

Conclusion: Ride the Currency Wave, Mind the Structural Headwinds

Malaysian palm oil futures are a high-reward, high-risk play in 2025. Investors must monitor the MYR/USD rate closely, as a 4.50 USD/MYR breakout could unlock gains, while a dip below 4.40 demands caution. Pair this with an eye on soybean oil competition and Indonesia's supply shifts. For now, the technical setup favors a bullish bias, but structural risks require disciplined risk management.

Stay agile—currency swings and commodity dynamics will decide the next move.