*(February 28, 2025, Kuala Lumpur)* — Persistent heavy rainfall-induced floods have severely impacted Malaysia's palm oil sector, exacerbating global supply constraints and driving significant price volatility.
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1. Production Disruptions Lead to Largest Output Decline in Nine Years^1^3^4
Since the onset of the Northeast Monsoon in November 2024, major palm oil-producing states like Sarawak and Sabah have faced continuous flooding, submerging plantations and halting harvesting and transportation. According to the Malaysian Palm Oil Board (MPOB), crude palm oil (CPO) production in December 2024 fell by 8.3% year-on-year, with inventories dropping to 1.71 million tons. By January 2025, production plunged a further 16.8% month-on-month to 1.237 million tons—the steepest monthly decline in nearly nine years—while inventories hit a two-year low of 1.58 million tons^1^4^7. MPOB warns that submerged plantations will require at least one month to recover, with Sarawak and Sabah forecased to receive 100 mm above-average rainfall in the next two weeks, potentially prolonging the recovery cycle^3^10.
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2. Global Supply Tightness Fuels Price Surge^1^3^4
Malaysia's production slump, coupled with Indonesia's biodiesel policy (B40 mandate), has tightened global palm oil supplies. By February 2025, palm oil futures prices surged nearly 9%, with prices projected to fluctuate between 4,500–4,800 ringgit/ton (≈$1,018–$1,086) in the first half of the year^3^4^7. However, prices plummeted 2.23% on February 24 due to weakened Indian demand and competition from cheaper soybean oil^3^7.
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3. Mounting Uncertainties Ahead^1^4^7
Although MPOB maintains a cautiously optimistic 2025 production target of 19.5 million tons (slightly above 2024's 19.34 million tons), persistent floods and the monsoon season threaten this outlook^1^4. Industry experts fear prolonged adverse weather could delay production recovery and amplify market volatility. Meanwhile, Ramadan (February 28–March 29) is expected to boost short-term demand, but India’s potential reduction in palm oil imports—due to narrowing price gaps with soybean oil—may partially offset this seasonal support^3^7^10.
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4. Industry Responses and Long-Term Challenges^1^3^4
MPOB highlights efforts by growers to mitigate short-term impacts through optimized agricultural practices and labor adjustments. However, extreme weather underscores the vulnerability of agricultural economies. Analysts note that if weather conditions stabilize, production could rebound in the second half of 2025, but global markets must remain vigilant regarding Indonesia’s biodiesel policy implementation and price fluctuations of competing oils like soybean oil^1^3^4.
*(Note: This report synthesizes data from MPOB and industry analyses as of February 28, 2025.)*
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References:
^1: MPOB's analysis on flood impacts and production targets.
^3^4^7: Price trends, inventory data, and regional weather forecass.
^10: Recovery timelines and monsoon-related risks.