CPO Price Surges Past RM8,000 a Tonne to Record High on Russia-Ukraine War

Kuala Lumpur — Crude palm oil (CPO) prices surged past RM8,000 a tonne to an all-time high in early March 2022, driven by disruption to sunflower oil supply from the Black Sea region amid the Russia-Ukraine war and Indonesia's domestic market obligation (DMO) policy. The Malaysian Palm Oil Board (MPOB) recorded the March CPO futures contract on Bursa Malaysia Derivatives climbing RM712 to RM8,163 a tonne, the April contract rising RM663 to RM7,435, and the benchmark May contract gaining RM463 to RM6,762.

A New Record, but Prices Have Peaked

MPOB director general Datuk Dr Ahmad Parveez Ghulam Kadir said CPO had reached a "supernormal" high of more than RM8,000 a tonne and had peaked, projecting a decline in the near term barring further crises. "We do not think there should be any further increase unless there is something like another crisis," he told the 2022 Palm & Lauric Oil Conference on Tuesday (8/3).

He noted the price had already retreated below RM7,000 a tonne in recent days and expected it to hold above RM5,000 for at least the first half of 2022, given uncertainty over how long the Russia-Ukraine crisis would last.

War and Indonesia's DMO Drive the Rally

MPOB had initially expected CPO to hover around RM7,000 a tonne because of Indonesia's policy requiring palm oil producers to sell a fifth of their output to domestic refiners at fixed prices. But the Russia-Ukraine crisis pushed prices past RM8,000 as buyers rushed to secure replacements for sunflower oil.

According to Reuters, palm oil prices have risen more than 40% so far this year after three straight years of gains. Palm oil became the costliest among the four major edible oils for the first time, and India asked Indonesia — which has an export restriction to calm domestic prices — to increase shipments.

What It Means for Indonesia

For Indonesia, the CPO surge cuts both ways. CPO is the main feedstock for biodiesel (FAME) under the B30 mandate, so higher feedstock prices risk raising biodiesel production costs and the price gap borne through BPDPKS export-levy funds. At the same time, high prices squeeze the affordability of domestic cooking oil — the reason the government imposed the DMO and export restrictions. This note is the editors' analysis of ongoing market dynamics, not an official projection.