Malaysian palm oil production has been on a declining trend since September, following robust growth in the first eight months of the year. In November, the Malaysian Palm Oil Council said palm oil exports declined by 14.7% to 1.48 year, November 2024 exports jumped by 5.7%, reaching the second-highest export volume for November since 2018. From January to November 2024, Malaysia's palm oil exports rose by 1.66 million tonnes (12.8%) and are projected to reach 16.8 million tonnes for the full year.

Looking ahead, MPOC believes palm oil demand in December to remain stable as importers stockpile ahead of Indonesia's B40 biodiesel mandate implementation in January 2025 and a potential revision to Indonesia's palm oil export levy structure in the coming months. Heavy rains and flash floods in Malaysia and Indonesia's Kalimantan region in late November have further disrupted harvesting and production. With monsoon season expected to persist into December, Malaysia's palm oil production is likely to decline further, potentially ending the year with inventories of 1.8 million tonnes – 21% lower than the 2.29 million tonnes recorded in December 2023.

The council noted that this is supportive of palm oil prices as it will limit palm oil export supplies. US soybean oil prices have fallen to their lowest levels since 2020, making it the most affordable vegetable oil globally. This price shift is largely driven by unclear biofuel policy under the Trump administration coupled with a bumper global soybean production for the current season. As of 11 December 2024, US soybean oil was priced USD 45 and USD 6 per tonne lower than soybean oil in Brazil and Argentine respectively. When compared to palm olein from Malaysia and rapeseed oil from Europe, it was USD 164 and USD 134 per tonne cheaper. The weak soybean oil prices in US are expected to reverse rapidly once US biofuel policy is clarified, prompting biofuel producers to resume their purchases, and driving up soybean oil prices.

With China removing the 13% tax rebate on UCO exports starting 1st December 2024, UCO imports to the US have become more costly. The US imported 1.07 million tonnes of UCO from China between January to October 2024, which accounted for 34% of UCO feedstocks used in biodiesel production. As a result, soybean oil usage in the US biofuel industry is anticipated to grow steadily in coming months.

In December, the anticipated recovery of soybean oil prices is likely to provide continued support for palm oil prices, keeping them above RM4,800. However, the extent of this price rally will hinge on supply conditions in Malaysia and Indonesia, particularly if severe monsoons persist throughout December, further disrupting production. Additionally, subdued energy prices will act as a limiting factor for palm oil price rally, as palm oil remains USD400 per tonne more expensive than gas oil,
necessitating substantial government subsidies to make palm oil viable for biodiesel blending.