This was the conclusion of an expert panel focusing on the Future of Commodities which convened in Kuala Lumpur, Malaysia and comprised of KLK Group COO Lee Jia Zhang, the USDA Foreign Agricultural Service Regional Agricultural Counselor Timothy Harrison and Euromonitor Head of Economies Practice Dr. Lan Ha.
India overtook China to become the world’s largest population in 2023, and is also the fifth largest global economy in the world. Indian prime minister Narendra Modi successfully defended his seat to lead the country for a third term, which experts believe is set to drive the local economy to new heights.
“Modi’s second term was focused on improving India’s self-reliance via domestic production and now his third term is to build further on this with agriculture as a key focus,” Dr Ha told the floor.
“We can expect to see a rise in modernisation in the country in order to increase domestic production as he wants to reduce reliance on imports – but this increased rate of urbanisation means there will also be an increase demand for food and the various basic commodities.
“The biggest global purchaser of commodities like palm oil and soybeans was previously China, but the state of the economy there has shown a slowdown and there is also an increased focus on security and self-sufficiency due to political tensions, which will likely lead to a decrease in imports of every sort.
“China is still a massive market and remains an important consumer base, but what we see is that demand from here will decrease in 2025 whereas demand from India will increase to support urbanisation and population growth.”
Harisson concurred with this from a soybean point of view, also predicting overall positive growth for the sector in the coming year.
“India has grown to become a major soybean oil importer, and considering that soybean production for the 2024/2025 season is around 9% up compared to the 2023/2024 season, the outlook of the soybean market is positive for 2025,” he said.
“The United States in particular has a historically large production this year that was up by 10%, and positive yields are also being seen in other major markets like Brazil and Argentina.”
Palm oil still to stay
With regard to palm oil, KLK painted a less rosy picture in terms of production yields but maintained confidence in its 2025 prospects.
“There has been good weather in Malaysia for palm oil production over the past three years, as it has been extremely wet compared to the usually dry periods we have to struggle with but we have been facing other challenges,” he said.
“The main one has been ageing trees as oil palm trees are costly and difficult to replant, and this is one of the reasons for declining yields.
“This is the same in Indonesia where about 27% of trees are over 20 years old but replanting is proceeding slower than it should due to a variety of reasons so not hitting the required 4% rate in order to ensure long-term yields – in short, we are not really replanting fast enough to keep up.
“Indonesia is also more challenging because there is a lot of third, fourth and fifth generation planting, and less labour availability which also means reduced expertise in the field.
“That said, this does not mean that 2025 prospects and beyond for palm oil are not viable – we need to remember that taking out palm oil from any food supply chain would mean having to replace this with some 140 million hectares of other oil-producing crops.
“This is an area larger that Malaysia or Germany in size and not very feasible – so moving forward, there is still a very important role for palm oil to play in the edible oils sector and to ensure food security.”
