Malaysian oil palm estates largely spared from flooding as Southeast Asia experiences devastating rainfall

Floods have swept across parts of Southeast Asia in recent weeks, including Malaysia, but plantation companies here report minimal disruption to estate operations. While the wet weather may lend some short-term support to crude palm oil (CPO) prices, industry observers note that the market has yet to price in any “meaningful” supply risk.

With October production coming in stronger than expected, attention now shifts to the Malaysian Palm Oil Board’s (MPOB) November and December data, which will determine whether the country can exceed its full-year CPO output forecast of 19.5 million tonnes. MPOB is set to release the November figures on Wednesday (Dec 10).

“Overall production this year will be higher due to the delayed cropping pattern,” CGS International analyst Jacquelyn Yow tells The Edge. She expects CPO prices to remain range-bound in the near term.

Industry experts contacted by The Edge expect CPO prices to hover between RM4,000 and RM4,330 per tonne this year. Bloomberg data shows third-month futures peaked at RM4,603 on Oct 9 before easing more than 10% to RM4,119 at the time of writing, partly due to China’s resumption of soybean oil imports from the US.

Still, experts caution that persistent heavy rainfall could strain operations. Excessive moisture may impede pollination, slow harvesting and hinder evacuation of fresh fruit bunches (FFBs), leading to FFB losses, lower mill utilisation and softer oil extraction rates (OERs).

“If weather conditions worsen, supply could drop more than expected in December and January,” warns CIMB Securities head of research Ivy Ng Lee Fang. Flooded roads, coupled with Malaysia’s newly tightened rules on heavy-vehicle overloading and stricter requirements for “rebuilt” vehicles, could further delay movements to ports, she notes.

MBSB Research says crop evacuation may be delayed by two to three days depending on flood severity, which could temporarily weigh on mill performance and OERs.

“Harvesting in low-lying blocks may be held back where access is limited and paths remain waterlogged. Smallholders are likely to face brief logistics delays, with FFB deliveries pushed back by two to three days, which could shift some production between late November and early December. There are reports of minor estate road damage and culvert washouts, but these remain localised and nowhere near the scale of the infrastructure disruption seen in the 2014/15 floods,” the research house tells The Edge.

Fastmarkets Palm Oil Analytics managing editor Dr Sathia Varqa says production typically enters the off-peak cycle between January and March, compounded by fewer working days during Chinese New Year and Ramadan.

Despite intense rainfall across parts of its Perak estates, United Plantations Bhd (KL:UTDPLT) says it remains on course to deliver record yields in 2025. The group manages 12 estates — nine in Perak, two in Selangor and one in Central Kalimantan, Indonesia — spanning 62,458ha, of which 46,227ha are planted with oil palm.

“The rains have been very extreme in central and lower Perak, with 130mm to 160mm recorded in 24 hours. Flooding has been severe, preventing harvesting across several thousand hectares,” CEO Datuk Carl Bek-Nielsen tells The Edge.

“However, water levels are subsiding steadily and we expect to recover the crop in December. Our team remains highly motivated to push yields to a new record. None of our mills have been affected.”

United Plantations operates five mills — four in Perak and one in Central Kalimantan.

In 2024, the group’s FFB yield improved slightly to 28.10 tonnes per hectare (from 27.99 tonnes), while its average CPO yield slipped to 5.93 tonnes per hectare (from 6.11 tonnes). OER moderated to 21.11% from 21.82%.

Kuala Lumpur Kepong Bhd (KL:KLK) reported only short-lived, localised interruptions in northern Peninsular Malaysia and North Sumatra, Indonesia.

“Operational impact is not material, although some lower crop recovery is expected. It is premature to revise our production forecast at the moment. We do not expect a significant impact as the floods were not prolonged. Normal operations have resumed in most areas,” the group tells The Edge.

KLK recorded FFB yield of 20.64 tonnes per hectare in 2024 (2023: 20.48 tonnes), while its CPO yield increased to 4.41 tonnes per hectare from 4.36 tonnes the year before. Meanwhile, OER strengthened to 21.36%, up from 21.29%.

The country’s second largest listed palm oil producer manages 96 estates and 34 mills across Malaysia (Peninsular Malaysia and Sabah), Indonesia (Sumatra, Belitung and Kalimantan) and Liberia, with a land bank of 355,165ha, of which 293,472ha (about 98%) are planted with oil palm.

Indonesia’s planned B50 biodiesel mandate is emerging as a key catalyst for CPO prices. MBSB Research estimates that the programme could divert between three million and 5.3 million tonnes of CPO to biodiesel once fully implemented, likely from the second half of 2026, tightening regional supply.

“In the near term, the market will monitor the results of the B50 technical and road safety tests, which have yet to begin. Separately, Indonesia’s intensified land use scrutiny could lift supply-side risk premiums in 1H2026,” says the research house.

Industry experts expect CPO prices to range between RM4,200 and RM4,800 per tonne in 2026.

Fastmarkets’ Sathia Varqa echoes the view, noting that Indonesia’s ongoing land seizures could have a substantial impact on global palm oil output. Millions of hectares of plantation land — largely oil palm — have been seized by the Indonesian government as part of its crackdown on illegal operations and corruption.

“Indonesia’s 2026 production could see an estimated loss of three million to five million tonnes. This is a significant reduction amid expectation of 1.5 million to two million tonnes of additional CPO requirements to meet the B50 mandate, expected to be implemented in 4Q2026. This means we can expect a lower palm oil supply outlook for Indonesia amid higher demand, a recipe for sustained higher prices,” he adds.