MPOC Sees Palm Oil Prices Supported by El Niño Risks and Tightening Supply

The Malaysian Palm Oil Council (MPOC) expects crude palm oil (CPO) prices to trade between MYR4,400 and MYR4,650 per tonne in July. According to the council, the market will be supported by tightening exportable supplies from Indonesia and growing concerns over the developing El Niño weather pattern.

MPOC said a strong El Niño could reduce rainfall across Southeast Asia, Australia, and India. Although the impact on oil palm yields is expected to emerge only after nine to twelve months, Malaysian officials have already warned that crop yields could decline by 8–10% this year, while rainfall in some states may fall by 40–60%.

At the same time, rising vegetable oil inventories in key importing countries could limit further price gains. In May, India’s vegetable oil stocks reached a 17-month high of 2.2 million tonnes, while China’s inventories climbed to nearly 2 million tonnes, the highest level recorded in 2026. These large stocks could temporarily slow import demand.

Malaysia’s palm oil production declined by 6.9% month-on-month in May to 1.51 million tonnes, reflecting a temporary resting phase of oil palm trees following unusually strong production in previous months, as well as fewer harvesting days due to public holidays. Despite the monthly decline, Malaysian palm oil exports increased by 13.8% during January-May, with the strongest growth recorded in shipments to India, Kenya, and Vietnam.

Market participants are also closely watching Indonesia, where the B50 biodiesel mandate takes effect in July. According to Oil World, the country’s palm oil production is expected to remain broadly unchanged this year, while domestic consumption and exports continue to increase. As a result, Indonesia’s exportable palm oil supplies are expected to tighten from late in the third quarter into the fourth quarter.

Additional support for the market comes from the global vegetable oil sector. U.S. soybean oil prices have surged 59% since the beginning of the year, driven by biofuel policies, significantly reducing the product’s export competitiveness. U.S. soybean oil exports fell to just 11,000 tonnes in May, the lowest level in 19 months, potentially increasing global buyers’ reliance on supplies from South America and Malaysia.

According to MPOC, the combination of climate risks, tightening Indonesian supplies, and weaker competitiveness of U.S. soybean oil is likely to keep palm oil prices relatively well supported. However, future market direction will largely depend on vegetable oil inventories in China and India, as well as weather conditions across major producing countries.

Tags: Malaysia, palm oil, crop forecast