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Palm Oil Industry Outlook, Challenges for 2024

The price of crude palm oil (CPO) experienced fluctuations throughout 2023, ranging from US$800 to US$1,000 (RM4,670) per tonne, compared to the previous year’s US$1,000. 

Council of Palm Oil Producing Countries (CPOPC) Secretary General Dr Rizal Affandi Lukman attributed the exceptional performance in 2022 to the war in Ukraine, impacting global crude oil and vegetable oil prices, contributing to inflation and affecting fertiliser costs. 

Highlighting challenges faced by Indonesia and Malaysia, Rizal Affandi pointed out that ageing palm oil plants necessitate a strategic focus on replanting to sustain productivity. 

Additionally, he addressed the evolving dynamics of the European Union Deforestation Regulation (EUDR), stating that Malaysia has enhanced its sustainability standards through the Malaysian Sustainable Palm Oil (MSPO) 2.0. 

Meanwhile, Indonesia is accelerating efforts, particularly among smallholders. 

While the European market’s influence on Indonesia’s export share declined to 10%-11% from 15.7% in the past five years, Rizal Affandi expressed optimism about maintaining demand through initiatives like the B35 biodiesel programme in Indonesia, utilising 43% of national palm oil production. 

He anticipated a robust market, especially in India, China and Pakistan, with increased demand expected around the Chinese New Year. 

“In terms of price, we expect the price to hover around US$800 to US$1,000 per tonne, unless a global situation happens,” he said during the CPOPC discussion on the challenges and opportunities in the palm oil industry in 2024 on Dec 12 in Kuala Lumpur (KL). 

Rizal Affandi also emphasised the CPOPC secretariat’s commitment to ensuring a smooth supply in 2025, emphasising collaboration between the palm oil-producing countries and the European Commission to address concerns, especially for smallholders. 

On the Malaysian front, CPOPC deputy secretary-general Datuk Nageeb Wahab discussed the challenges in the biodiesel sector, highlighting Malaysia’s nascent stage compared to Indonesia. 

According to Nageeb, a 10% increase in domestic consumption equates to approximately 300,000 tonnes, a stark contrast to Indonesia, where a similar increase represents three to four million tonnes. 

Presently, Indonesia’s consumption ranges from 10 to 12 million tonnes, while Malaysia’s biofuel consumption is merely 300,000 tonnes. 

He opined that even if Malaysia were to raise domestic consumption to 30%, the impact would not be as significant as in Indonesia, where a 10% increase translates to three to four billion tonnes. 

Looking at the supply perspective, an oversupply of palm oil in the future appears improbable, suggesting firm prices. 

Nageeb said palm oil’s current position is fundamentally sound. Growers are shifting focus from expanding acreage, given the associated costs and environmental concerns. 

Instead, the emphasis is on enhancing existing yields, although this will take time. 

Unlike a decade ago when Indonesia experienced annual production increases of four to five million tonnes, creating oversupply, the current situation suggests a more stable growth trajectory. 

“I personally believe, fundamentally prices should firm up because it is all about supply and demand,” said Nageeb. 

Looking ahead to 2024, he expressed bullish sentiments about prices despite challenges, especially related to negative perceptions of palm oil and potential labour-related regulations. 

He added that it is crucial to note that the EU’s perspective centres not on palm oil being inherently bad but on protecting their own oil sources — grapeseed, canola and soybean — which face heavy subsidies and struggle to compete with palm oil, necessitating the imposition of barriers. 

Furthermore, CPOPC director of sustainability and smallholders Dr Witjaksana Darmosarkoro highlighted a significant difference between smallholders in Indonesia and Malaysia — whereby, approximately 90% of smallholders in Malaysia have certification, whereas in Indonesia, the figure is likely less than 1%. 

This implies that in terms of cruise line certification, Malaysia is more prepared for implementation compared to Indonesia. 

Addressing the differences of certification model in Indonesia and Malaysia, Witjaksana said presently, palm oil supplied to the European market adheres to certifications like RSPO, MSPO or the International Sustainability and Carbon Certification (ISCC), aligning with EUDR parameters. 

However, concerns arise about the EUDR’s impact on mills, particularly its requirement for a segregated approach, necessitating separation from certified sources like MSPO or RSPO. 

The situation, according to Witjaksana, poses a challenge for smallholders without current certifications, who may need to access different mills, potentially distant. 

Contrasting this, the existing mass balance approach allows smallholders to supply without immediate certification. 

Witjaksana highlighted that addressing the risk is crucial in discussions with the EU regarding the requested approach. 

Additionally, EU smallholders have an extended preparation period, implementing EUDR by June 2025, unlike Indonesia and Malaysia’s January 2025 timeline. 

Witjaksana said a parallel extension is also sought for uniformity in EUDR implementation timelines. 

Earlier in the discussion, the council engaged with academicians to address misinformation about the palm oil industry, EUDR and smallholders, underscoring the council’s dedication to transparent communication and collaboration. 


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