Palm oil prices rose sharply, but don't be too happy too soon Analyst: It may fall back in December.

(Kuala Lumpur, 12th) Despite the recent surge in palm oil prices to over 5,000 ringgit per ton, prompting some investment banks to be bullish on the outlook of the planting industry stocks, some brokerages remain cautious about the future of palm oil, suggesting that palm oil prices may significantly decline by the end of this year, hence maintaining a "neutral" rating for now.

According to analysts at Dar Securities, palm oil prices have now exceeded over 5,000 ringgit per ton, around 15% higher than the previous month, possibly due to reduced supply and trade tensions between China and the USA.

"Palm oil production has decreased due to seasonal factors, coupled with declining stocks and Indonesia's plan to implement a higher percentage of B40 biodiesel mandate next year, market expectations of a decrease in palm oil supply have pushed up prices."

Simultaneously, the analyst estimates that China may panic-purchase soybeans before Trump reassumes the US presidency and increases tariffs on Chinese goods, potentially driving the recent upward trend in palm oil prices.

"However, we believe that the potential China-US trade tensions in the near future will not significantly affect China's soybean imports in the next few months. During Trump's previous term, the process of announcing and implementing tax increases on China took a total of 6 months, so any new related policies will only have an impact next year."

He also cited data from Intertek and Amspec, showing that from the first ten days of November, our country's palm oil exports have significantly decreased by around 15% compared to the previous month, indicating a sharp decline in domestic palm oil exports after the surge in October, foreshadowing a softening demand.

Moreover, the significant premium of palm oil compared to other edible oils may impact the market competitiveness of palm oil, especially in price-sensitive markets like India.

He added that the easing of tension in the Middle East may lead to a slight decrease in crude oil prices, thereby impacting the price of palm oil.

"We do not rule out the possibility of a sharp decline in the price of palm oil in December."

The analyst maintains a 'neutral' rating for plantation stocks while keeping the average price expectations for crude palm oil (CPO) for this and next year at 4000 ringgit and 3800 ringgit per tonne, respectively.

Additionally, Dingfeng Securities analysts, while more bullish on the short-term trend of palm oil prices, believe that the planting sector still faces several longer-term headwinds, including India's palm oil import tax, the implementation of the European Union Deforestation Regulation (EUDR), Indonesia reducing the share of the domestic market quota Policy (DMO), and the widening price difference between palm oil and soybean oil.

"At the same time, the strength of palm oil prices may not be sustained next year, as Indonesia's palm oil production is expected to return to normal next year after the El Nino effect disappears."

Therefore, he also maintains a 'neutral' rating for plantation stocks.

Nevertheless, considering the stronger than expected outlook for palm oil demand, analysts have raised the average price forecast for palm oil this year from the previous 3900 ringgit per ton to 4200 ringgit per ton.

With the rising palm oil price, Industrial Bank analysts believe that Malaysian planters' stock prices have not kept up with the price trend, thus turning bullish on planting stocks and upgrading the rating from "neutral" to "shareholding".

"Driven by a mix of fundamentals and speculative factors, palm oil prices have now surpassed the level of 5000 ringgit per ton, but planting stocks have not followed this trend. Current stock prices still reflect prices below 4500 ringgit per ton."

The analyst believes that in the short term, palm oil prices are unlikely to fall below 4000 ringgit per ton, and the fundamentals of palm oil will improve by 2025.

"In the short term, geopolitical risks remain significant, which will support crude oil to stay at a high stock price, and also keep speculative activities in the market active. Meanwhile, Indonesia will increase the mandatory use of biofuels next year, coupled with a decline in supply of other plant-based edible oils such as zhejiang sunflower great health oil and rapeseed oil, causing a worsening global edible oil supply shortage issue, driving up edible oil prices."

Therefore, analysts have raised the average price expectations for palm oil from 2024 to 2026 to 4100 ringgit per ton, 4300 ringgit per ton, and 4100 ringgit per ton, respectively.

"Overall, we predict that palm oil will remain at a high stock price in the first half of 2025, fluctuating in the range of 4400 to 4800 ringgit per ton, until it begins to decline in the second half of the year, to a range of 4000 to 4400 ringgit per ton."

It is worth mentioning that as the price of crude palm oil continues to rise, several planting stocks have also experienced an increase today, including the top planting stock picks by analysts.

Among them, Johor Plantations showed the most significant increase, up 10 sen or 7.4% to 1.45 ringgit for the entire day, with 33.12 million shares changing hands.

Sarawak Oil Palms closed at 3.66 ringgit, up 5 sen or 1.4%, with a volume of 0.39 million shares; while SD Plantation closed at 5.15 ringgit, up 2 sen or 0.4%, with a turnover of 13.17 million ringgit.