Lang
KUALA LUMPUR – The Malaysia Palm Oil Council (MPOC) anticipates crude palm oil (CPO) prices to trade within a range of RM4,400 to RM4,650 per tonne during August. This stability is expected to be bolstered by several key factors, including Indonesia's implementation of its B50 biodiesel mandate starting in July, robust energy markets, and improved economic viability for biodiesel production.
Despite an 8.0 per cent month-on-month increase in Malaysian palm oil production to 1.63 million tonnes in June 2026 – attributed to a typical seasonal upswing beginning in March – output remained 3.0 per cent lower compared to the same period a year earlier. This marks the fourth consecutive month of year-on-year decline, as highlighted in an MPOC statement. However, a decade-high oil extraction rate (OER) has contributed to overall supply resilience, even in the face of weaker export volumes and softer global demand.
Exports saw a 6.1 per cent rise from May, reaching 1.2 million tonnes in June, but still lagged 4.0 per cent behind June 2025 figures. This decline reflects a subdued consumption of oils and fats in crucial markets like China and India, partly due to the ongoing repercussions of the Middle East conflict. The MPOC maintains a favourable outlook for Malaysia's palm oil supply, primarily driven by enhanced extraction efficiency rather than an increase in fresh fruit bunch production.
Data from the Malaysian Palm Oil Board (MPOB) further indicates that production held broadly stable during the first half of 2026, while palm oil stocks expanded to 2.5 million tonnes by June. The strong OER, likely supported by beneficial rainfall in 2025 which improved the oil content of harvested fresh fruit bunches, was a principal driver of this production resilience. MPOC cautioned, however, that 'if El Nino develops in early 2027, drier conditions could weaken the OER'.
Globally, vegetable oil markets displayed mixed trends in July. Palm oil and soybean oil prices saw increases of 3.0 per cent and 6.0 per cent month-on-month, respectively, while sunflower oil and rapeseed oil experienced declines of 1.0 per cent and 2.0 per cent. Sustained strong biodiesel demand, particularly from the United States and Indonesia, continues to provide structural support for palm oil and soybean oil prices.
Looking ahead, global oilseed production is projected to expand in the 2026/27 season, although at a slower pace. The combined output of soybean, sunflowerseed, and rapeseed is forecast to increase by 16.5 million tonnes, which is below the average annual increase of 22.7 million tonnes observed over the past four years. MPOC noted that 'global reliance on soybean oil, sunflower oil and rapeseed oil has increased since 2019 amid tighter exportable palm oil supply from Southeast Asia'. This slower growth in oilseed production, coupled with rising demand for vegetable oils, especially from the biofuel sector, is expected to keep prices supported over the longer term.
In the near term, MPOC suggests that demand remains subdued. High vegetable oil inventories in India, despite slower import activity, indicate weaker consumption driven by inflationary pressures. Nevertheless, demand is anticipated to improve leading up to the Diwali festive season, as India typically imports approximately 30 per cent of its annual vegetable oil requirements between July and September.
Source: NST Online