PALMOILMAGAZINE, JAKARTA – Malaysia’s palm oil production strengthened in June 2026 as the industry entered its seasonal peak harvest period, although subdued global demand continued to cap price gains. Despite the softer consumption outlook, the Malaysian Palm Oil Council (MPOC) expects crude palm oil (CPO) prices to remain resilient at RM4,400–RM4,650 per metric ton throughout August, supported by Indonesia’s B50 biodiesel mandate and firmer energy markets.
According to an MPOC market report, Malaysia produced 1.63 million metric tons of palm oil in June, representing an 8% increase from May as seasonal production typically accelerates from March onward.
However, output remained 3% below June 2025 levels, marking the fourth consecutive month of year-on-year production declines.
Also Read: Tight Supply and Weather Risks Support CPO Above RM4,400, Says MPOC
Exports Recover, but Demand Remains Weak
Malaysia’s palm oil exports improved during June, rising 6.1% month-on-month to 1.20 million metric tons. Nevertheless, export volumes were still approximately 4% lower than the same period last year.
MPOC attributed the slower recovery primarily to muted vegetable oil demand in key importing markets such as China and India, while ongoing geopolitical tensions in West Asia continued to disrupt global vegetable oil trade flows.
Also Read: Malaysia CPO Futures Ease After Hitting 15-Week High as Global Oils Weigh on Market
Vegetable Oil Markets Show Mixed Performance
Vegetable oil prices moved in different directions during July 2026.
Palm oil prices increased by approximately 3% from the previous month, while soybean oil climbed 6%. In contrast, sunflower oil and rapeseed oil declined by 1% and 2%, respectively.
MPOC said expanding biodiesel demand in both the United States and Indonesia has been instrumental in supporting palm oil and soybean oil prices despite weaker food-sector demand.
Oil Extraction Rate Reaches Highest Level in a Decade
On the supply side, Malaysia’s production outlook remains constructive.
Data from the Malaysian Palm Oil Board (MPOB) showed that first-half 2026 production remained broadly stable, while palm oil inventories rose to 2.5 million metric tons at the end of June.
A key driver behind stronger production has been the improvement in the country’s Oil Extraction Rate (OER).
Also Read: India’s Rising Vegetable Oil Imports Could Lift Global Palm Oil Prices
Average OER during January–June 2026 reached 20.08%, up from 19.45% in the same period of 2025, representing Malaysia’s highest extraction efficiency in the past ten years.
MPOC credited the improvement to favorable rainfall throughout 2025, which enhanced oil formation in fruit harvested this year. However, the council cautioned that a potential El Niño event in early 2027 could reduce oil extraction efficiency if drier weather develops.
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Global Demand Still Moderate
Worldwide production of major oilseed crops is expected to continue expanding during the 2026/27 marketing season, although growth is projected to slow.
Combined production of soybeans, sunflower seed, and rapeseed is forecast to increase by around 16.5 million metric tons, below the average annual expansion of 22.7 million metric tons recorded over the previous four years.
According to MPOC, slower supply growth could provide underlying support for global vegetable oil prices, particularly as biofuel demand continues to expand.
Also Read: Tighter Supply and Strong Indian Demand to Support CPO Prices in March, Says MPOC
In the near term, however, consumption remains relatively soft in several major importing countries.
India, for example, continues to hold substantial vegetable oil inventories despite lower import volumes, indicating that domestic consumption remains constrained by inflationary pressures.
MPOC expects buying activity to strengthen ahead of the Diwali festival, when India typically imports nearly 30% of its annual vegetable oil requirements between July and September.
Given its competitive pricing relative to other major edible oils, palm oil is expected to remain India’s preferred import choice during the festive buying season.
Also Read: Indonesia Ramps Up Science-Based Palm Oil Diplomacy to Counter Global Trade Pressures
Indonesia’s B50 Policy and Energy Markets Support Prices
Looking ahead, MPOC projects CPO prices will trade within RM4,400–RM4,650 per metric ton during August 2026.
The forecast is underpinned by Indonesia’s nationwide B50 biodiesel mandate, which took effect in July, improving energy market fundamentals and enhancing biodiesel economics.
In addition, rising geopolitical tensions between the United States and Iran pushed gasoil prices roughly 30% higher during early to mid-July. With gasoil now trading above both palm oil and soybean oil prices, vegetable oils have become increasingly attractive as biodiesel feedstocks.
Despite these supportive factors, MPOC believes further upside for CPO prices may remain limited by sluggish global demand recovery and elevated vegetable oil inventories across several major consuming countries. (P2)
