Projected Decline in Palm Oil Production in Malaysia

07-Jul-2026 05:13 PM

Kuala Lumpur: Crude Palm Oil (CPO) production in Malaysia is likely to decline during the 2026-27 season due to reduced rainfall and dry weather conditions caused by the El Niño phenomenon.

Meanwhile, the implementation of the B50 program in Indonesia is expected to boost domestic demand and consumption of palm oil, potentially reducing exportable stocks.

Thailand's palm oil production is also feared to be impacted by El Niño. Consequently, the supply and availability of palm oil for the global export market could become complicated. The situation could worsen further if decisions are made to increase mandatory palm oil usage levels in biodiesel production in Malaysia and Thailand.

According to a report by the US Department of Agriculture (USDA), Malaysia saw robust palm oil production during the 2025-26 season, but output is expected to dip slightly in the 2026-27 season.

The USDA notes that the impact of El Niño began in June 2026 and may persist for several months into 2027. In light of this, CPO production in Malaysia during the 2026-27 marketing season (October–September) is projected to decline slightly, settling at 19.7 million tonnes.

Reduced rainfall is expected to lower oil palm yields and the average oil extraction rate. This impact is likely to be most pronounced during the third and fourth quarters of the marketing season. Previously, the USDA had estimated Malaysia's 2025-26 palm oil production at 19.7 million tonnes but subsequently raised the forecast by 0.3 million tonnes to 20 million tonnes.

This upward revision was based on strong production performance during the eight-month period from October 2025 to May 2026.