KUALA LUMPUR, Jan 21 (Reuters) - Malaysian crude palm oil (CPO) futures are expected to average higher in 2025 than last year, as top producer Indonesia boosts palm oil-based biodiesel consumption, although competition from cheaper rivals is expected to limit the upside, a Reuters poll showed.
Benchmark palm oil prices will average 4,350 ringgit ($972.07) a metric ton this year, up 5.4% from 2024, according to a median estimate of 11 traders, analysts and industry participants.
The average CPO closing price of 4,128 ringgit in 2024 was 8.7% higher than the previous year, as adverse weather disrupted supply, sending the market to a 2-1/2-year high in November.
Indonesia's B40 biodiesel mandate would result in reduced export availability, in return favouring Malaysian palm oil exports, said Anilkumar Bagani, head of research at Mumbai-based vegetable oil broker Sunvin Group.
"Indonesia's planned increase in the biodiesel blend rate to 40% in 2025 is expected to absorb an additional 1.2 to 1.7 million metric tonnes of CPO," said Malaysian Palm Oil Association CEO Roslin Azmy Hassan.
"Reduced palm oil exports from Indonesia, coupled with adverse weather in Southeast Asia, will likely also support higher prices."
Roslin Azmy said the market could get an additional boost if Indonesia raises export levy to support its biodiesel policy.
To help finance its ambitious biodiesel mandates, Indonesia plans to increase export levy on CPO to 10% from 7.5%, but a regulation is required for that to happen, according to Indonesian officials.
Gains in palm oil prices are however likely to be capped by rising supplies of rival soyoil from South America, which has recently been available at a discount to the tropical oil, said a New Delhi-based dealer with a global trade house.
Indonesia and Malaysia are expected to see a modest rise in palm oil output in 2025.
Indonesia's output is projected to rise 1.9% from last year to 49.8 million tons in 2025, the poll showed.
Malaysia, the world's second-largest producer, is forecast to produce 19.5 million tons, up 0.83% from last year and the highest since 2019.
Adverse weather, persistent labour shortages and low replanting rates continue to weigh on Malaysia's palm oil output growth potential, industry officials say.
