CPO Breaks RM5,000: Falling Malaysian Stocks and Indonesia's B40 Mandate Reprice the Palm Oil Supply Chain

Crude palm oil (CPO) futures in Malaysia traded at RM5,236 per tonne on Nov 11, 2024, up RM92 from RM5,144 the previous Friday and a level not seen since June 30, 2022. Year to date, the benchmark edible-oil feedstock had risen 43% from RM3,662. The move pushed Bursa Malaysia's Plantation Index to a 29-month high of 7,762.88 points, up 131.3 points, or 1.72%, on the day - and set a new cost baseline for food processors, oleochemical plants and biodiesel blenders that buy palm oil as their main raw material.

What tightened the balance

• stocks: Malaysian Palm Oil Board (MPOB) data showed palm oil inventories at end-October 2024 fell 6.32% to 1.88 million tonnes from 2.01 million tonnes in September - the first decline in three months and a drop below the closely watched two-million-tonne mark;
• biodiesel: Indonesia, the world's largest palm producer, plans a mandatory 40% palm-based biodiesel blend (B40) from January 2025, which would divert exportable supply into domestic fuel;
• seasonality: output enters its seasonally weaker phase at the end of the year while buyers stock up ahead of festive seasons;
• market reaction: plantation shares became top gainers on the local bourse, with United Plantations closing at an all-time high of RM29.16, up 3.77%, and Johor Plantations Group adding 7.14%.

Analysts see RM5,000 as a floor, not a peak

CIMB Securities head of research Ivy Ng attributed the rally to the inventory drawdown reported by MPOB and said CPO could stay above RM5,000 through the first half of 2025; she did not rule out a breach of RM6,000 in the near term on tight supply and festive-season buying, while stressing that weather in key planting areas remains the swing factor. David Ng, a derivatives trader at Iceberg X Sdn Bhd, expects CPO to average RM4,800 per tonne for 2024, up from about RM3,800 in 2023, calling the fundamental outlook "very supportive".

CGS Securities analyst Jacquelyn Yow noted that forecasters at the Indonesian Palm Oil Conference placed CPO in a RM4,500-RM5,000 range, with prices elevated in the first half of 2025 on tight supply and seasonal demand around the Lunar New Year and Ramadan.

Winners and losers along the chain

The price spike redistributes margin between upstream and downstream. Among upstream players, Kuala Lumpur Kepong closed at RM22.34 (a RM24.55 billion valuation), SD Guthrie at RM5.13 (RM35.48 billion), Genting Plantations at RM5.51 and Hap Seng Plantations at RM2.04; Yow favours Hap Seng, Ta Ann Holdings and Sarawak Plantation for their leverage to elevated CPO prices and production growth. Integrated groups with large refining and oleochemical operations, such as KLK and IOI Corp, face the opposite pressure: high feedstock costs squeeze downstream margins, which is why CGS Securities kept a "neutral" stance on the sector even as prices rose.

What B2B buyers watch next

For procurement teams in food manufacturing, cosmetics ingredients and biofuels, the story is a supply-side repricing: sub-two-million-tonne stocks in Malaysia, a B40 mandate that pulls Indonesian barrels out of the export pool, and weather risk in planting areas. The full market report was published by The Edge Malaysia on Nov 11, 2024.