Palm oil market to remain tight in 2026 despite supply recovery

According to Fastmarkets’ forecast, the global palm oil market in 2026 will remain finely balanced between rising demand and structural supply constraints. Growing consumption from the food and biofuel sectors continues to outpace the industry’s ability to expand production, supporting a firm price environment and sustaining market volatility.

Indonesia remains the key supply driver. Fastmarkets expects crude palm oil (CPO) production in Indonesia to recover by 1.5–2.0 million tonnes in 2026 compared with 2024 levels. However, significant risks are emerging from the government-backed land seizure program. Around 1.5 million hectares of oil palm plantations have already been transferred to state control, with a further 1.8 million hectares under verification, potentially putting 2–5 million tonnes of CPO output at risk in 2026.

In contrast, Malaysia is facing a more challenging outlook. After a strong production year in 2025, Fastmarkets projects Malaysian CPO output to decline to 19.6 million tonnes in 2026, down 400,000 tonnes year on year. Stagnant planted area, aging oil palm trees and heavy reliance on foreign labour continue to cap the country’s production potential in the near term.

Biofuel policy will remain a key anchor for prices. Indonesia plans to implement a B45 biodiesel mandate in 2026, while the more ambitious B50 blend is now expected only toward the end of the year. As a result, a substantial share of palm oil supply will continue to be absorbed by domestic fuel demand, limiting export availability and providing downside price support.

On the demand side, Fastmarkets highlights India as the main pillar of global palm oil imports in 2026, while Chinese demand is expected to stay subdued due to ample soybean oil stocks. In the European Union, regulatory developments — particularly the postponed EU Deforestation Regulation (EUDR), now scheduled for December 2026 — will also influence trade flows and pricing. Overall, Fastmarkets expects firm palm oil prices in the first half of 2026, with a flattening trend later in the year as Indonesian supply recovery gradually meets market demand, barring unexpected weather or policy shocks.

Tags: export, Indonesia, prices, India, Malaysia, palm oil, crop forecast