Malaysia : Palm oil enters 2026 with caution as weather risks weigh on output
Malaysia’s palm oil sector enters 2026 on stable footing, backed by steady global demand and biofuel use. Prices are expected to stay firm yet volatile. Weather risks, replanting, rising compliance costs and competition remain challenges, but productivity initiatives and strong consumption in major markets support the industry’s medium-term outlook.
KUALA LUMPUR: Malaysia’s palm oil industry is heading into 2026 on firmer ground, but with rising exposure to price swings, shifting trade rules and climate risks that could quickly test the sector’s resilience.
Malaysian Palm Oil Board (MPOB) director general Datuk Dr Ahmad Parveez Ghulam Kadir said the board is cautiously positive on next year’s production outlook, although weather-related risks remain a key variable.
He said replanting activity may also temporarily constrain output as newly planted areas have yet to reach full productivity, but these efforts are critical to the long-term health and sustainability of the industry.
“Overall, MPOB views the industry as being on a sound structural footing, with replanting and productivity initiatives expected to strengthen medium-term production prospects,” he told Business Times.
PRICES FIRM, BUT VOLATILITY PERSISTS
On prices, Ahmad Parveez said crude palm oil (CPO) in 2026 is expected to remain firm but volatile, supported by steady global demand, including biofuel consumption.
Short-term price movements, he added, are likely to be influenced by fluctuations in crude oil prices and policy developments in major markets.
Economist and plantation expert Dr Mohd Zulkufli Zakaria shares a similar view, projecting palm oil prices in 2026 to range between RM3,800 and RM4,500 per tonne.
For 2025, now drawing to a close, prices are expected to trade between RM3,800 and RM4,300 per tonne, supported by steady global consumption growth, he said.
International forecasts, including those by the United States’ Foreign Agricultural Service, anticipate global palm oil consumption to expand by around 2.5 to 3.0 per cent.
Mohd Zulkufli said sustained global demand and rising biofuel usage are expected to continue underpinning prices, alongside supply-side developments in key producing countries.
He noted that Indonesia has increasingly absorbed palm oil volumes domestically, with estimated usage of about 13 million-14 million tonnes, compared with around 12 million tonnes in 2014.
In addition, the expansion of renewable diesel production in countries such as Brazil and the US, which relies heavily on soybean oil, could indirectly lift palm oil demand as a substitute.
“A weaker ringgit could also support palm oil demand,” he said.
“Meanwhile, any severe weather affecting global soybean oil production could trigger a spike in demand for palm oil.”
RESILIENT SHOWING IN 2025
Ahmad Parveez said the palm oil industry recorded a resilient and generally positive performance in 2025, supported by improved production, firmer prices for most of the year and sustained demand from key export markets.
These factors helped underpin overall revenue despite some moderation in export volumes.
“Key drivers included better labour availability, steadier harvesting operations, ongoing replanting, productivity improvements and supportive global vegetable oil market conditions,” he said.
However, he noted that the sector continued to face challenges, including weather-related disruptions, intensified competition from other edible oils and increasingly stringent sustainability and traceability requirements in major markets.
Overall, MPOB assessed the industry’s performance in 2025 as stable, with continued progress in both productivity and sustainability.
Mohd Zulkufli said Malaysia’s palm oil performance should not be viewed in isolation from Indonesia, given Jakarta’s influence on global palm oil policies, pricing and market direction as the world’s largest producer.
The sector’s resilience stems from its ability to adapt and differentiate amid regional competition, although greater stability could be achieved by addressing structural issues such as ageing trees and limited availability of new land for expansion.
While price volatility persisted during the year, levels remained above long-term averages, supported by supply challenges in other vegetable oils and ongoing geopolitical disruptions.
Malaysia also maintains access to alternative markets including China, Africa, India and the Middle East, despite trade challenges with the European Union.
However, planters continue to face margin pressure due to rising compliance requirements, on top of labour and other operational costs needed to maintain plantation health.
Despite these pressures, Mohd Zulkufli said broader macro drivers are expected to support sustained demand.
These include the growing role of palm oil in both food and energy markets, rising demand from populous countries such as India, and increasingly unpredictable weather linked to climate change.
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Source : The Business Times
