Crude Palm Oil (CPO) Analysis: Trade Policy, Price Trends & Outlook – Jun 2025

Crude Palm Oil (CPO) is a reddish-orange vegetable oil derived from the mesocarp of the oil palm fruit (Elaeis guineensis). It is semi-solid at room temperature and primarily composed of triglycerides, rich in saturated and monounsaturated fatty acids such as palmitic acid (about 44 per cent) and oleic acid (approximately 39 per cent). CPO also contains minor components like carotenoids (pro-vitamin A), tocopherols (vitamin E), sterols, and phospholipids, which influence its colour and stability. The oil has a typical free fatty acid (FFA) content of around 3.5–5 per cent and an iodine value ranging between 50 and 55, reflecting its moderate unsaturation level.

End Uses and Derivatives
Crude Palm Oil is extensively utilised across the food, cosmetic, and industrial sectors. In the edible domain, it is refined and used in cooking oils, margarine, bakery fats, and confectionery. Its oxidative stability and cost-efficiency make it suitable for frying and food preservation. In non-food applications, palm oil is employed in the production of soaps, detergents, oleochemicals, and increasingly, in biofuels such as biodiesel. Derivatives of palm oil like palm olein, palm stearin, palm kernel oil, and fatty acid methyl esters (FAME) are commercially significant for varied downstream industries.

Crude Palm Oil (CPO) Import Policy and Government Intervention
The Indian Government, on May 30, 2025, reduced the Basic Customs Duty (BCD) on crude edible oils including crude palm oil, crude soybean oil, and crude sunflower oil from 20 per cent to 10 per cent, effectively bringing the total duty to 16.5 per cent after including the 5 per cent Agriculture Infrastructure and Development Cess (AIDC).

Additionally, the government has extended the free import of refined palm oil until further notice, allowing flexibility in procurement amid volatile global supply conditions.         

CPO Market Impact and Price Trends
CPO prices have demonstrated a firm upward trend in recent weeks. By mid-May 2025, crude palm oil was trading at around $915 per metric ton, subsequently rising to approximately $980 per metric ton by this week June 2025, reflecting improved market sentiment and stronger buying activity. This marks a 5 per cent increase from early June levels of $930 per metric ton, with the rally largely driven by stronger demand and improved market sentiment. The recent uptick reflects a $30–45 per metric ton post-policy surge.

The sustained price rally culminated in December 2024, with CPO reaching a peak of $1,200 per metric ton. This sharp increase was primarily the result of disrupted harvesting activities in Indonesia and Malaysia, where adverse weather conditions, particularly prolonged heavy rains, significantly impacted palm oil production.

Palm Oil Global Consumption and Geopolitical Influence
Palm oil a raw material of crude palm oil is a staple in major markets like India, China, the European Union, and several Asian nations. In addition to its culinary applications, rising demand from the biodiesel sector—notably in Asian and in the EU continues to support global consumption. Moreover, geopolitical tensions, such as the ongoing Iran-Israel conflict, have created uncertainties in global commodity markets, indirectly influencing palm oil and its derivative market.

Crude Palm Oil (CPO) Market Forecast – Q3 2025 (July to September)

Price Projection

Expected Price Range: $930 to $1190 per metric ton

Key Factors Supporting an Uptrend

• Robust Demand from Major Buyers: Procurement activity in India and China is likely to intensify, driven by festive season demand and higher consumption by food-processing industries.
• Biofuel Sector Pull: Continued enforcement of biodiesel blending policies in countries like Indonesia, Malaysia, and across the EU is expected to divert a substantial volume of palm oil to the energy segment.
• Weather-Related Production Constraints: Seasonal rainfall and potential flooding in key producing regions (Malaysia and Indonesia) may disrupt harvesting, tightening global supply.
• Policy Support in India: The reduction in India’s Basic Customs Duty on CPO from 20 per cent to 10 per cent (effective from May 30, 2025) has made imports more attractive, thereby boosting purchase volumes.
• Low Inventory Levels: Limited stock availability in exporting nations may put upward pressure on prices, especially during July and August.

Potential Downside Risks

• Global Economic Concerns: A slowdown in global economic activity or tighter financial conditions could reduce speculative demand and put a cap on prices.
• Improved Weather in Growing Regions: Normalised weather patterns in Southeast Asia could lead to a rebound in production, easing supply pressures.
• Geopolitical Tension Easing: A potential de-escalation in the Iran-Israel conflict may reduce global risk premiums, stabilising commodity markets.

Currency and Shipping Dynamics

• Freight & Logistics: International shipping rates are expected to remain firm, influenced by route disruptions and elevated insurance costs—especially for vessels passing through high-risk zones like the Red Sea and Persian Gulf due to regional instability.