Global Palm Oil Market Summary

• Malaysia’s palm oil market is approaching a potential record production year, with September output rising 16% month on month to 2.12 million tonnes and inventories climbing 25% to a record 3.51 million tonnes. Despite ample supply, global palm oil prices have increased around 18% since early 2026, supported by biodiesel demand and stronger export activity.
• Production is expected to peak in October, with full-year output potentially matching or exceeding the 2025 record of 20.28 million tonnes. Malaysian exports rebounded sharply from September’s downturn, but high inventories could limit further price gains unless export growth remains strong.
• Structural challenges are building. A shortage of approximately 18,000 workers threatens harvesting efficiency, while rising labor costs could squeeze margins. A potential El Niño event also poses a risk to yields in late 2027. Shifting workers from plantation maintenance to harvesting could further affect longer-term productivity.
• Indonesia’s expanding biodiesel program is supporting domestic palm oil consumption, while Chinese demand and competition from soybean oil continue to influence price movements. Higher crude oil prices also improve palm oil’s competitiveness as a biodiesel feedstock.
• The near-term outlook depends on whether stronger exports can reduce Malaysia’s inventory overhang. While biodiesel demand and crude oil prices provide support, abundant stocks, labor shortages and potential weather disruptions leave the market exposed to volatility.