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Southeast Asian palm oil production and market trends

Updated 4 times since CLSTR started tracking revisions of this situation.

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2026-08-28 14:21 UTC → 2026-09-09 06:50 UTC · added ~~removed~~

In early August 2026, rising diesel costs and fuel shortages in Malaysia and Indonesia threatened palm oil harvests. Smallholders in Sabah, Sarawak, and Sumatra were forced to reduce harvesting frequency due to insufficient diesel subsidies, raising concerns about global edible oil output alongside looming El Niño conditions. By mid-August, Malaysian crude palm oil production showed seasonal strength, rising 9.4% month-on-month to 1.79 million tonnes. While exports increased by 14.5% due to restocking efforts in India, the stock-to-use ratio declined. By late August, crude palm oil (CPO) prices reached their highest levels since December 2024, with futures closing at 5,018 Malaysian ringgit per ton. This rally was driven by fears of El Niño-induced dry weather and expectations that Indonesia’s upcoming B50 biodiesel program in October 2026 would boost domestic demand. Recent updates highlight specific production risks and company performance. Kencana Agri Limited reported a 5.6 percent increase in CPO production for the first half of 2026, supported by an improved oil extraction rate of 21.4 percent. Regarding weather impacts, the Indonesian Palm Oil Association (Gapki) estimates that Indonesian production could decrease by approximately three million tons next year—a 5 percent drop—due to dry conditions making fertilizer application difficult. However, Gapki Chairman Eddy Martono noted this is a downward revision from previous estimates of four to five million tons due to recent rainfall. In Malaysia, the Malaysian Palm Oil Council (MPOC) suggested that the December monsoon might mitigate Super El Niño effects, noting that rainfall between September and November will be critical for 2027 production levels. By early September 2026, CPO markets showed mixed trends.

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