Southeast Asian palm oil production faces El Niño risks

The palm oil industry in Southeast Asia faces production challenges due to the El Niño phenomenon, though recent weather patterns may mitigate some impacts. In Malaysia, the Malaysian Palm Oil Council (MPOC) suggests that the upcoming monsoon season in December could help dampen the effects of the Super El Niño on production. CEO Belvinder Sron noted that El Niño impacts typically manifest with a nine to 12-month delay, meaning rainfall patterns between September and November will be critical in determining production levels for 2027.

In Indonesia, the Indonesian Palm Oil Association (Gapki) estimates that palm oil production could decrease by approximately three million tons next year, representing about a 5% drop from current levels. Gapki Chairman Eddy Martono stated that while production may fall, the revision from previous estimates of four to five million tons is due to recent rainfall in several plantation areas. The dry conditions have also made it difficult for farmers to apply fertilizer.

A potential reduction in Indonesian production, combined with the implementation of the B50 biodiesel mandate, is expected to tighten global supplies. While domestic needs in Indonesia will remain a priority, the decrease is likely to impact export volumes, potentially driving up palm oil reference prices.