KUALA LUMPUR: BMI, a unit of Fitch Solutions, expects a partial recovery in Malaysia’s palm oil output in 2025 and 2026, forecasting a 0.5 per cent year-on-year increase to 19.5 million tonnes, supported by favourable weather conditions.
In a note today, BMI said the Malaysian Meteorological Department has projected normal to slightly below-normal rainfall between July and September 2025, followed by a return to normal and above-normal rainfall with the onset of the Northeast Monsoon from October to December.
“Major palm oil-producing states including Sarawak, Sabah, Pahang, Johor and Perak are anticipated to experience largely normal weather conditions, signalling minimal weather-related disruptions to the upcoming harvest season,” it said.
BMI noted that with most land in Malaysia already cultivated or allocated for urban development, there is little scope for further expansion of planted areas.
“Consequently, production growth must rely on yield improvements driven by the replanting of ageing trees.
“Nevertheless, according to the Malaysian Palm Oil Council (MPOC), merely 2.0 per cent of Malaysia’s total planted area for palm oil was replanted in 2024, significantly below the country’s annual target of 4 per cent to 5 per cent,” it said.
It said that persistently high palm oil prices since 2021 have led farmers to prioritise short-term gains from lower-yielding ageing trees over longer-term replanting.
“While this trend is likely to reverse slightly in the short term as palm oil prices ease in 2025 and 2026, we expect it to persist over the longer term as we anticipate prices to remain elevated and policy support to remain inadequate over our forecast horizon,” it added.
Meanwhile, CGS International Securities Malaysia Sdn Bhd said the impact of United States tariffs on the sector is likely to be limited, as only 2.3 per cent of Malaysia’s palm oil exports were shipped to the US in 2024.
“The tariff differential between Malaysia and Indonesia (25 per cent versus 32 per cent) should also give Malaysian palm oil a slight pricing edge in the US market,” it added. – Bernama
