Malaysia boosts palm oil production despite labor shortages and weather risks

Malaysia’s palm oil production could reach a new monthly record in October 2026, putting the country on track to end the year with its highest output on record. According to the Malaysian Palm Oil Association (MPOA), total production in 2026 could match or exceed the record 20.28 mln tons achieved in 2025. MPOA chairman Roslin Azmy Hassan told that following the expected peak in October, production could gradually decline in November and December, while the industry may face additional constraints in 2027 due to labor shortages and the effects of El Niño.

In September, Malaysia’s palm oil production increased by 16% month-on-month to a record 2.12 mln tons. This contributed to a 25% rise in inventories, which reached an all-time high of 3.51 mln tons. Despite ample supplies, global palm oil prices have increased by approximately 18% since the beginning of 2026. Prices have been supported by higher crude oil prices amid the conflict in the Middle East, the expansion of Indonesia’s biodiesel programme and expectations of lower production due to unfavorable weather conditions. In mid-September, palm oil futures reached 5,049 ringgit per ton, their highest level since December 2024.

The increase in Malaysian production since June has been partly driven by newly planted oil palms reaching maturity, replacing older and less productive trees. According to industry representatives, modern planting material delivers significantly higher yields than varieties used 25 years ago. However, record production figures conceal serious structural challenges in the sector. Malaysian plantations are currently short of approximately 18 thsd harvest workers, potentially leaving up to 8.6 mln tons of fresh oil palm fruit bunches unharvested. According to MPOA estimates, the resulting revenue losses could reach 8 bln ringgit ($1.96 bln).

To address labor shortages, producers have been forced to reassign workers from plantation maintenance and other operations to harvesting. However, this practice creates risks for timely fertilizer application, plantation upkeep and maintaining productivity. Malaysia’s palm oil industry relies heavily on foreign workers, and its workforce has yet to recover fully from the pandemic due to immigration restrictions and government employment quotas. A planned increase in the minimum wage in 2027 is expected to put additional pressure on profitability. Meanwhile, production costs have already risen to approximately 2,600–3,000 ringgit per ton of palm oil.

El Niño remains another major risk to Malaysian palm oil production, bringing higher temperatures and reduced rainfall. According to MPOA, the negative effects of this weather phenomenon on oil palm yields may emerge with a delay, particularly in the second half of 2027. The combination of unfavorable weather conditions, labor shortages and rising production costs could constrain palm oil supplies following a potentially record-breaking 2026. Meanwhile, future global price movements will depend on the pace of inventory reductions in Malaysia, demand from the biofuel industry and producers’ ability to maintain harvesting volumes amid persistent labor shortages.

Tags: Malaysia, palm oil