USDA cuts Malaysia’s palm oil production forecast

The US Department of Agriculture (USDA) has lowered its forecast for Malaysia’s palm oil production in the MY 2026/27 to 19.7 mln tons. The revision reflects expectations that the El Niño weather pattern will bring dry conditions from June 2026 through much of 2027.

According to the USDA, dry weather is expected to reduce fresh fruit bunch (FFB) yields. As oil palm productivity typically responds to moisture stress with a delay of several months, the largest decline in production is expected during the third and fourth quarters of the marketing year.

At the same time, the USDA raised its MY 2025/26 production estimate to 20 mln tons, up 300 thsd tons from the previous forecast. The increase reflects stronger-than-expected output during the first eight months of the marketing year.

The planted area for oil palm in MY 2026/27 is forecast at 5.16 mln ha, compared with 5.15 mln ha a year earlier. This estimate is in line with data from the Malaysian Palm Oil Board (MPOB) and is virtually unchanged from the previous USDA forecast.

Despite the expected decline in production, domestic palm oil consumption in Malaysia is projected to increase. The USDA forecasts consumption at 4.59 mln tons in 2026/27 MY, up 330 thsd tons from the previous season. The main driver is the gradual rollout of the B15 biodiesel programme, which began on 1 June 2026. According to the MPOB, moving from B10 to B12 will increase annual palm oil demand by about 130 thsd tons, while expanding to B15 will add another 204 thsd tons.

Tags: Malaysia, palm oil, crop forecast