Palm oil production to remain high through the end of 2026

Palm oil production is expected to remain seasonally firm over the next two to three months as the industry enters its peak-crop period, according to BIMB Research. Emerging dry conditions are not expected to materially affect output in the second half of 2026 due to the normal lag between rainfall deficits and oil palm yields.

However, the risk of lower regional production is increasing for 2027, particularly if a strong El Niño and below-normal rainfall persist through the end of 2026. The delayed impact of adverse weather could tighten palm oil supply next year.

In July, Malaysia’s crude palm oil (CPO) production rose by 9.4% month on month to 1.79 mln tons, while inventories increased to 2.63 mln tons. High stocks and seasonally stronger production could limit further price gains in the near term.

At the same time, prices are being supported by strong biodiesel demand and concerns over El Niño. The average CPO price in the first seven months of 2026 stood at 4,388 ringgit/t. BIMB Research forecasts an average price of 4,400 ringgit/t in 2026 and 4,500 ringgit/t in 2027.

Analysts expect prices to remain elevated in the coming months, while tighter regional supply could provide additional support in 2027. A more pronounced shortage of palm oil or other vegetable oils on the global market could create further upside for prices.

Tags: palm oil, oil production