Palm Oil Prices Under Pressure as Ringgit Strengthens and Competitors Weigh

The global palm oil market faces headwinds as the Malaysian Ringgit (MYR) strengthens, crude oil prices weaken, and Chicago soy oil futures decline. These factors are creating a challenging environment for palm oil producers and traders, with prices hovering near multi-year lows.

Ringgit Strength: A Double-Edged Sword

The MYR has appreciated to 0.22 USD/MYR (as of March 2025), marking a 2.3% gain over the past year. While this benefits Malaysian importers, it pressures palm oil exporters. Palm oil is typically priced in USD, so a stronger MYR reduces the USD-denominated revenue per tonne. For instance, a 1% MYR appreciation effectively cuts exporter profits by 1%, assuming prices remain flat.

Palm oil settled at RM4,538/tonne on March 1, 2025—2.7% below February’s high but still 15.3% higher than March 2024 levels. Analysts warn that further MYR gains could erode profit margins, especially as export volumes have already dipped 8.5–11% year-on-year in February 2025.

Crude Oil’s Decline: A Blow to Biofuel Demand

Crude oil prices have weakened on concerns about slowing demand from China and global economic uncertainty. As palm oil competes with crude-derived fuels, lower crude prices reduce the incentive for biofuel blending. For example, in the EU, palm oil’s share of renewable diesel feedstock fell from 25% in 2021 to 18% in 2024 as refiners pivot to cheaper alternatives.

A 10% drop in crude prices typically correlates with a 3–5% decline in palm oil prices, according to historical data. With crude now trading near $70/barrel—down 18% from its 2023 peak—the pressure on palm oil remains acute.

Soy Oil’s Slump: A Competitive Threat

Chicago soy oil futures (BOK25) have weakened alongside broader agricultural markets, squeezing palm oil’s price advantage. While soy oil prices rose briefly in April 2024 (+32–38 points), they have since retreated, with U.S. soybean exports falling 17.8% year-on-year in early 2025.

The soy-palm oil price spread, a key indicator of competitiveness, narrowed to $38/tonne in March 2025—its tightest level since 2020. This reduces palm oil’s cost advantage, benefiting buyers of alternative oils.

Shipping Costs and Export Dynamics

Shipping costs have dropped to 12-month lows, with the Shanghai-to-Los Angeles route at $3,477/40ft container (late February 2025). While this eases logistics expenses, it has not offset the impact of weaker demand. Indonesia’s aggressive export tax cuts have also intensified competition, squeezing Malaysian market share.

Conclusion: Bearish Sentiment Likely to Persist

Palm oil prices face a trifecta of challenges: a stronger MYR, weak crude oil demand, and soy oil’s declining prices. With Malaysian exports down 8–11% year-on-year and global biofuel demand under pressure, the outlook remains bearish.

Historical context underscores this risk: palm oil prices have fallen 36% from their April 2022 peak (RM7,268/tonne) amid oversupply and shifting trade policies. Analysts project further declines, with forecasts suggesting prices could dip to RM3,722/tonne by late 2025—a level not seen since 2021.

Investors should monitor the MYR/USD exchange rate closely, as further appreciation could accelerate downward price pressure. Meanwhile, traders in vegetable oils may pivot toward soy oil or rapeseed, which appear more resilient in the current macroeconomic climate. For palm oil stakeholders, the path to stabilization likely hinges on a weaker MYR, stronger crude prices, or a revival in biofuel mandates—a scenario that appears distant in the near term.