Palm Oil Near Three-Month Low as Indonesia Seeks Zero US Tariffs on Key Exports

Falling prices sharpen Indonesia's push for tariff relief

Palm oil futures fell about 1.7 percent to below 4,250 Malaysian ringgit per tonne on Thursday, reaching their lowest level in nearly three months as Indonesia sought to remove US tariffs on palm oil, cocoa and rubber. The decline marked a fourth consecutive session of losses, with a stronger ringgit, cheaper competing vegetable oils and softer seasonal demand weighing on the market.

As of November 2, 2025, Jakarta was seeking the same treatment Malaysia had secured under its new agreement with Washington: zero tariffs on those three commodities, while a general 19 percent tariff continued to apply to other goods. Indonesia, the world's largest palm oil producer, said most of its agreement was complete, with legal drafting still to be finished.

Trading data tracking global benchmarks showed palm oil futures had fallen roughly 2.9 percent over the preceding month and about 9.2 percent compared with a year earlier. The immediate pressure came from currency movements and buying conditions, while the tariff negotiations offered a possible source of support for Indonesian exports.

Indonesia's Coordinating Minister for Economic Affairs Airlangga Hartarto, who leads the negotiating team, said discussions would resume after the Asia Pacific Economic Cooperation Summit in South Korea. His target was to complete the agreement by November 2025.

The stakes extend from plantations and refineries in Southeast Asia to American food and household goods manufacturers. At the article's reference price of about $899 per tonne, a 19 percent tariff adds roughly $171 per tonne before freight and handling. Removing that charge would reduce the cost faced by US buyers at a time when producers are dealing with falling market prices.

Why the ringgit and competing oils matter

Palm oil futures are priced in ringgit on Bursa Malaysia. When Malaysia's currency strengthens against the dollar, buyers using dollars or other currencies can face a higher effective price even if the quoted price in ringgit stays unchanged. Some importers may then delay immediate purchases or slow new tenders, the requests they issue for suppliers to offer cargoes.

A stronger ringgit therefore puts pressure on demand from overseas. It also limits the appeal of buying opportunistically after a fall in futures, because part of the apparent saving can disappear when the buyer converts money into ringgit.

Softer prices for competing vegetable oils have added to the decline. Soybean oil and other rival oils traded lower in China's Dalian markets and in Chicago. Food manufacturers and refiners compare palm oil with soybean, sunflower and rapeseed oils, adjusting purchases and blends according to their relative costs.

These price gaps, often called spreads, matter because a buyer may be able to substitute one oil for another in some products. When soybean oil becomes cheaper, palm oil may need to fall too to remain attractive. Moves in Chicago Board of Trade soybean oil and Chinese markets can consequently influence palm oil prices quickly.

Trading strategies reinforce those connections. Arbitrage involves responding to price differences between markets, while hedging means taking a market position to help protect against an unwanted price change. Both can transmit movements between competing oils without waiting for a manufacturer to place a new physical order.

Winter buying slows as supply expectations rise

India and China, two major buyers that remain central to palm oil price formation, are entering a seasonal period of softer purchasing. Importers often build inventories before festivals and then reduce buying as winter approaches. Comfortable stocks in both markets have limited the need for fresh cargoes even as futures have retreated.

Palm oil's tendency to be partly solid at room temperature makes it useful in many foods, but it can be less favoured during colder months. That seasonal change adds to the slowdown that follows earlier purchases for festive demand.

India's food sector chooses among palm, soybean and sunflower oils according to relative prices and seasonal needs. Stocks accumulated before recent festivals have reduced immediate import requirements. In China, signs of a slower economy have curbed discretionary consumption, while inventories and crush margins also guide purchasing.

Crush margins describe the economics of processing oilseeds into oil and other products. Those margins affect buying and production of rival oils, which in turn influence how much palm oil Chinese buyers want.

Indonesia's production is expected to rise toward about 56 million metric tons in 2025, according to industry data, exceeding earlier expectations. More supply arriving during a period of softer demand adds pressure to prices. Cargo surveyor tallies showed shipments from October 1 to October 25 edging down by roughly 0.3 to 0.4 percent from the corresponding period a month earlier.

There were also supportive signals in the wider trading environment. The White House expressed optimism about talks with Beijing, and US President Donald Trump spoke positively about prospects for a trade truce with Chinese leader Xi Jinping. Those signals accompanied, rather than removed, the immediate pressures from currency strength, competing oils and seasonal buying.

Jakarta says the agreement is nearly complete

The United States imposed a general 19 percent tariff on Indonesian goods in early August, after earlier discussions reduced a higher rate. Jakarta has sought exemptions for products the United States does not produce domestically, particularly palm oil, cocoa and natural rubber.

Airlangga said the two countries had agreed in principle to remove tariffs on those products once the legal text was finalised. He described almost all technical elements as settled, with the remaining work focused on drafting the agreement into its final legal form.

Airlangga Hartarto, Indonesia's coordinating minister for economic affairs and chief negotiator, described the progress during remarks in Jakarta:

We have actually managed to finish almost every part of the agreement. However, we still have to do the legal drafting.

Airlangga also set out the intended tariff treatment for palm oil, cocoa and rubber:

The tariff will be zero or close to zero.

The timetable links the existing tariff, the next negotiations and the government's completion target:

• Early August 2025: The United States set a general 19 percent tariff on Indonesian goods after reducing an earlier, higher rate.
• October 1 to October 25: Cargo surveyor figures showed shipments slipping roughly 0.3 to 0.4 percent from the corresponding period in September.
• After the APEC summit in South Korea: Indonesia and the United States were due to resume discussions.
• November 2025: Jakarta targeted completion of the agreement.

The exact effective date and final tariff wording had not been given. Whether the agreement would contain a clause allowing Washington to restore tariffs during a dispute was also unresolved, leaving those details important for contracts and cargoes already at sea.

Purchases and investment form part of the bargain

Indonesia's negotiations extend beyond commodity exemptions. Jakarta has offered to purchase American crude oil, liquefied petroleum gas, aircraft and agricultural products as part of the wider commercial relationship.

Indonesian officials have also expressed openness to US investment in energy infrastructure, including fuel storage facilities. That cooperation would involve Indonesia's sovereign wealth fund and state energy company Pertamina.

Jakarta has proposed very low tariffs on most American goods entering Indonesia. Together, the purchases, investment proposals and tariff concessions show how access for Indonesian palm oil is being negotiated within a broader exchange of trade commitments.

Malaysia's recent agreement provides a regional comparison. Washington granted zero tariffs on palm oil, cocoa and rubber while retaining a general 19 percent tariff on other Malaysian goods. Indonesia is seeking equivalent treatment for the same key commodities.

What removing a 19 percent tariff would change

A tariff is a tax charged when goods cross a border. For a tonne of palm oil priced at about $899, multiplying that price by 19 percent produces a tariff charge of roughly $171, before freight and handling. Removing the charge would make an Indonesian cargo cheaper from the perspective of an American buyer.

The saving could improve importers' margins or reduce costs for manufacturers using palm oil. US customers include snack makers, producers of instant noodles and baked goods, soap and cosmetics companies, and businesses blending biodiesel.

Indonesian plantations and refiners could also receive better returns on cargoes sold to the United States. Traders refer to those returns as netbacks, meaning the amount left from a sale after relevant costs are taken into account.

Lower import costs could encourage some American users to substitute palm oil for competing oils, especially as price gaps with soybean oil change. Stronger US demand could then provide support for futures during the current period of weakness.

Existing supply contracts and the timing of any tariff change will shape how quickly those benefits reach buyers and sellers. Market participants will also watch Malaysia's position, because its commodity exemptions already give Indonesian negotiators a direct competitive benchmark.

A smaller export destination with a strong Indonesian presence

Indonesia shipped about 1.39 million tons of palm oil to the United States in 2024. The American market is smaller than India or China as a destination for Indonesian exports, but its varied demand across food, household products and industrial uses makes it a stable market with considerable commercial value.

Indonesia holds an estimated 85 to 90 percent share of the US palm oil market. Securing zero tariffs could help it defend that position against Malaysia and could increase Indonesian shipments to American customers.

Eddy Martono, chairman of the Indonesian Palm Oil Association, said the industry faced less boycott pressure in the United States than in Europe. He described that difference as a source of strength for Indonesia's American business:

We do not face the level of negative campaigns in the United States that we see in Europe, so our market position there remains strong.

The US market therefore combines two attractions for Indonesian producers: a large existing share and customers spread across several industries. Tariff relief would improve the cost of serving those customers while helping Indonesia compete with another major Southeast Asian supplier.

Calls to include garments and footwear

Malaysia's success has prompted calls for Indonesia to press harder in its own negotiations and seek reductions beyond agricultural commodities. Bhima Yudhistira Adhinegara, executive director of the Center of Economic and Law Studies, said Jakarta should use Malaysia's outcome to strengthen its bargaining position.

Bhima argued that the Malaysian palm oil exemption showed Indonesia had room to seek better terms:

Looking at the palm oil issue, Malaysia can get a zero percent tariff, meaning Indonesia should use its bargaining power more effectively.

Bhima also urged negotiators to pursue reductions for garments and footwear, pointing to their importance in Indonesia's exports to the United States:

Indonesia should push for major tariff reductions on garments and footwear since those two commodities account for a large share of our exports to the United States.

The broader request reflects the structure of Malaysia's agreement. Exemptions for three commodities can improve conditions for those sectors while leaving other exporters subject to the general 19 percent rate. For Indonesian businesses outside palm oil, cocoa and rubber, the scope of the final agreement will matter as much as its completion date.

Europe presents a different market access challenge

The European Union and Indonesia recently concluded a broad trade pact intended to phase in tariff relief for most Indonesian exports by 2027. Palm oil also faces separate European deforestation rules, which were scheduled to begin taking effect from December.

Those rules require proof that products do not come from recently cleared land. Tariff relief concerns the tax charged at the border; traceability concerns whether a supplier can document where the product originated. Indonesian exporters have to address both when selling into Europe.

Large companies can often provide the necessary documentation. Smallholders, who manage more than 40 percent of Indonesia's oil palm plantations, may find the process expensive and difficult. Tracking production from many small farms through processing and shipment creates a substantial practical task.

Industry leaders in Jakarta have urged faster progress on a national traceability system. Without such a system, some shipments risk delays or rejection in Europe because the required information may be incomplete.

The United States does not apply the same deforestation regime, which partly explains the more supportive conditions for Indonesian supply there. Consumer brands still increasingly impose their own sourcing standards, making credible sustainability criteria a commercial requirement for access to buyers paying for higher quality across different regions.

Domestic biodiesel and the next market signals

Indonesia's domestic biodiesel blending programme provides a steady source of local palm oil consumption. By using palm oil in fuel, the programme can offset swings in export demand and help stabilise farmer incomes.

Higher domestic blending can also reduce the amount available for export. That makes the programme relevant to traders assessing supply, alongside the industry's expectation that Indonesian production will approach 56 million metric tons this year.

Weather remains another influence on supply. Rainfall patterns in Southeast Asia affect harvesting and the amount of oil in fruit, so changes in weather can alter yield expectations and the flow of cargoes to export markets.

In the immediate market, traders will follow the ringgit, soybean oil prices in Chicago, other rival oils and logistics flows from Indonesia and Malaysia. A recovery in competing oils could ease downward pressure on palm oil, while October cargo surveyor figures will help show whether the recent export dip continues as winter buying slows.

On trade policy, the next steps are the resumption of talks after APEC and the legal drafting needed before a formal announcement. Updates on reciprocal purchases and investment cooperation will also matter because they form part of the bargain supporting Jakarta's request for tariff exemptions.

November is the government's stated target for completing the US agreement. December is the next scheduled checkpoint for Europe's deforestation requirements, while 2027 is the intended date for tariff relief under the broader EU trade pact. Those different timetables place immediate price pressure, American negotiations and European compliance demands side by side for Indonesian producers.

The Bottom Line

• Palm oil futures fell about 1.7 percent to below 4,250 ringgit per tonne on Thursday, reaching a low of nearly three months after four consecutive sessions of losses.
• Futures were down roughly 2.9 percent over a month and 9.2 percent from a year earlier, with a stronger ringgit, softer rival oils and seasonal buying weakness weighing on prices.
• Indonesia's production was expected to approach 56 million metric tons in 2025, exceeding earlier expectations.
• Jakarta sought zero or nearly zero US tariffs on palm oil, cocoa and rubber, matching Malaysia's exemptions while the general tariff stood at 19 percent.
• Airlangga Hartarto said most negotiations were complete, with legal drafting and talks after APEC still ahead of a November completion target.
• At about $899 per tonne, removing a 19 percent tariff would eliminate a charge of roughly $171 per tonne before freight and handling.
• Indonesia exported about 1.39 million tons of palm oil to the United States in 2024 and held an estimated 85 to 90 percent share of that market.
• Calls for broader US tariff reductions included garments and footwear, while European deforestation requirements increased pressure to improve traceability.
• Smallholders manage more than 40 percent of Indonesia's oil palm plantations, making accessible documentation systems important to European market access.