Lang
Analysts say Indonesia's decision to halt its biodiesel expansion, combined with expectations of higher output in the coming months, is likely to pressure palm oil prices, though strong demand and slower overall production growth could limit the decline.
Speaking at an industry conference in Kuala Lumpur this week, analysts said palm oil output from Southeast Asia, which supplies nearly 90% of the global market, is expected to rise slightly in 2026 on improved weather in Indonesia, the top producer, even as output in Malaysia, the second-largest producer, is forecast to fall.
More palm oil supply is likely to flood the global market after Indonesia suspended plans to raise its biodiesel blending mandate to 50%.
Analyst Dorab Mistry said he expects Malaysian palm oil futures to trade in a narrow range of between 3,800 and 4,300 ringgit ($968–$1,096) per tonne between now and July 2026, barring any fresh weather-related disruptions.
"We are in the weakest period for palm production today, yet, in my view, the drawdown in stocks is not significant," Mistry said.
The benchmark Malaysian palm oil futures contract fell 35 ringgit, or 0.85%, to close at 4,060 ringgit per tonne on Wednesday.
Thomas Mielke, executive director of Hamburg-based forecaster Oil World, said: "There could be some scope for palm oil prices to ease in the short term, over the next month or two."
He added: "But over the medium to long term, slower growth, an expected drawdown in palm oil stocks, and insufficient growth in Indonesian production... should be supportive [for prices]."
Mielke said global edible oil consumption is expected to grow by 7.1 million tonnes in the 2025/2026 season, while production is projected to expand by 5.3 million tonnes.
He added that Indonesia's palm oil output is estimated at around 48.8 million tonnes in 2026, while Malaysia's production is expected to reach 19.7 million tonnes.
Strong Demand Growth, Slower Output Growth
Analysts said rising Indian purchases and slower production growth could support prices.
India, the world's largest edible oil importer, is likely to buy more palm oil this year, drawing down stocks that had risen to multi-month highs in Malaysia.
Analysts added that Indian demand for palm oil is poised to recover this year as prices fall, although competition from Chinese soybean oil, an alternative cooking oil, will limit that growth.
However, China's demand for palm oil is expected to fall further in 2026 as the country shifts to cheaper alternatives such as canola and soybean oil, palm oil traders and analysts said at the conference on Monday.
Izzana Salleh, secretary-general of the Council of Palm Oil Producing Countries (CPOPC), said: "In China, the 2026 outlook has been negatively affected by the expansion of domestic soybean crushing capacity, ample supplies of alternative vegetable oils, and continued price-driven substitution away from palm oil."
Palm oil analysts said Indonesian authorities' seizure of palm plantations is also likely to weigh on production due to reduced fertiliser use and a lack of maintenance.
Indonesia's crackdown on the palm oil industry, which began last year led by a task force comprising the military, police and prosecutors, has resulted in the confiscation of around 4.1 million hectares, affecting major palm oil companies as well as smallholders. Authorities said these operators had been working illegally in forest areas.
"If we look at the figures, we see that fertiliser imports have fallen by nearly 20%. That's an indication that in several areas, fertiliser use is being reduced... and that will have an impact on yields and on production," Mielke said.
The enforcement campaign is set to expand further this year, with the government looking to seize an additional 4 million to 5 million hectares (12 million acres) of palm plantations.
Indonesia's crude palm oil output is expected to grow by 2% to 3% this year, after rising 8% to 51.98 million tonnes in 2025, according to the Indonesian Palm Oil Producers Association (GAPKI).
Source: Reuters