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The global palm oil market is bracing for a significant supply tightening. According to the latest USDA forecasts, global inventories for the 2026/27 marketing year are expected to plummet to their lowest levels since the 2017/18 season. This decline is largely driven by a projected decrease in global production, which is set to fall by 2.5 million tons compared to the previous season.
Indonesia, the world's leading producer, is the primary driver of this downward trend. The USDA has revised Indonesia's output forecast downward by 2.2 million tons, bringing the expected total to 45 million tons from an earlier estimate of 47.2 million tons. This adjustment is a direct result of recent dry weather patterns that have compromised crop yields and growth prospects across the archipelago.
The supply crunch in Indonesia is rippling through the export market. Indonesia's export volume is now anticipated to reach only 21.6 million tons, down from the previously estimated 23.5 million tons. While Malaysia is expected to mitigate some of the shortfall with a production forecast of 19.6 million tons and an increased export target of 16.2 million tons (up from 15.9 million), it will not be enough to fully bridge the gap.
Major consuming nations are also feeling the impact of these tighter supplies. Palm oil import forecasts for India have been reduced to 8.4 million tons from 8.7 million tons, while China's outlook has dropped to 3.7 million tons. Similarly, Pakistan's expected imports were cut to 3.5 million tons. Other significant importers include Bangladesh at 1.4 million tons and Vietnam at 0.94 million tons.
Collectively, global palm oil exports for the 2026/27 season have been revised down to 43.75 million tons from 45.26 million tons. The production woes in Indonesia are also weighing heavily on the broader vegetable oil complex. The USDA now forecasts total global vegetable oil production at 243.16 million tons, a notable decrease from the previous projection of 245.36 million tons.
Source: UkrAgroConsult