Malaysia’s palm oil sector will remain stable thanks to the removal of US tariffs and the deferment of EUDR.
Malaysia’s palm oil sector gained relief after a US tariff exemption, steady production, and improved sustainability recognition. High inventories and weak demand pressured prices, but supportive policies, budget allocations, and rising soybean oil prices may boost 2026 prospects. The Malaysian Palm Oil Council expects stronger demand and prices near MYR4,500 per tonne.
Malaysia’s palm oil sector breathed a sigh of relief after being exempted from a 19 percent import tariff imposed by the United States, as it maintained robust momentum this year despite weak external demand and high inventories.
Crude palm oil (CPO) was trading at RM4,089.50 per tonne in November 2025, up from RM5,011.50 in November 2024, but prices are projected to rise to around RM4,500 early next year. As of December 10 this year, the CPO price was RM4,000 per tonne.
Exports remained flat this year. Production reached 22.55 million tonnes in the first 11 months of 2025, valued at MYR 103.01 billion, compared to 26.66 million tonnes, valued at MYR 109.39 billion, for the full year of 2024.
Palm oil, the country’s largest export commodity, remains the mainstay of the industry, with farm-based fresh fruit bunch (FFB) yields increasing to 14.45 tonnes per hectare in January-October 2025, up from 13.96 tonnes per hectare in the same period last year.
During the year under review, production growth was offset by lower external demand, higher inventories and increased pressure on sustainability in key markets, particularly China, as buyers sought cheaper alternatives such as soybean oil.
Weaker demand has contributed to a rise in domestic stocks, which have risen to more than 2.7 million tonnes, the highest level in six years.
Higher prices have caused palm oil supplies to major markets, particularly China, to plummet by almost 30% in the first 10 months of this year as buyers turned to comparatively cheaper alternatives such as soybean oil.
The imbalance between high production volumes and slowing overseas purchases continued to put pressure on consumer prices, limiting growth potential despite favorable fundamentals in the first half of the year.
Malaysia’s commodities sector has had a turbulent 2025 as US tariff announcements have added to ongoing uncertainty, starting with a 24 percent tariff announced on April 9 and culminating in reports of a 25 percent rate from August 1.
The turning point came on October 26 with the signing of the Reciprocal Trade Agreement (ART) during the 47th ASEAN Summit in Kuala Lumpur.
The agreement exempted 1,711 tariff lines, including key exports such as palm oil, from the 19 percent tariff, covering about US$5.2 billion (22 billion yuan) worth of exports and providing much-needed relief after months of instability.
EUDR deferral, MSPO recognition bring further relief to Malaysia
Beyond trade, in 2025 the commodity sector gained greater market access and improved its position in the global market following key changes to the EU Deforestation Regulation (EUDR) and the recognition of the Malaysian Sustainable Palm Oil (MSPO) Standard.
On November 26, the European Parliament approved a one-year deferment for EUDR. This gives large operators until December 30, 2026, and small businesses until June 30, 2027, to comply, allowing more time for a smoother transition and updating the EU’s digital due diligence system.
The European Union’s official recognition of MSPO on September 10 as a credible and traceable sustainability certification further strengthened Malaysia’s position.
This approval reduces compliance barriers for Malaysian exporters, facilitates smoother trade flows and cements the country’s leadership in sustainable palm oil production.
Budgetary Appropriations Increase and Prospects for 2026
The 2026 budget brought good news for small farmers as the government allocated funds to modernise agribusiness and support small farmers.
Almost RM2.4 billion has been announced to protect over 720,000 settlers, smallholders and their families by the Federal Land Development Authority (FELDA), the Rubber Industry Smallholders Development Authority (RISDA) and the Federal Land Consolidation and Rehabilitation Authority (FELCRA).
Around RM20 million will be allocated to support start-ups in the production of mechanization and automation equipment in collaboration with the Malaysian Palm Oil Council and major palm oil companies to reduce reliance on foreign workers and stimulate local innovation.
Looking ahead, the palm oil sector is expected to continue to demonstrate high potential, albeit in a highly competitive environment, as key industries face export recovery and bullish momentum.
The recovery in soybean oil prices will narrow the significant price gap between the two oils, as the recovery in soybean oil prices will strengthen the sector.
The Malaysian Palm Oil Council said palm oil prices could rise to MYR4,500 per tonne in 2026, driven by robust import demand ahead of the Chinese New Year and Ramadan, while uncertainty over Indonesian policy continues to support palm oil prices.
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Source : Ukr Agro Consult
