PALMOILMAGAZINE, NUSA DUA, BALI — The International Conference on Palm Oil (ICOP) 2025 once again served as a key forum for discussions on global palm oil dynamics. In a session titled “Southeast Asia’s Palm Oil: Balancing Uncertain Supply and Shifting Demand,” Kian Pang Tan, Lead Analyst of Agricultural Research at LSEG Singapore, presented the latest analysis on regional production trends, trade flows, domestic consumption, and emerging market challenges.
According to Kian, palm oil production across the region is expected to face significant pressure over the next two years. “Indonesia is projected to produce only 51–52 million tons—lower than last year—due to a high proportion of aging trees, slow replanting, land seizures, and mid-year dry weather,” he explained, as quoted by Palmoilmagazine.com.
Malaysia is also heading toward a slight decline of about 1%, bringing expected output to 19.2 million tons. The drop is linked to slow replanting progress, pest attacks, and a large share of old trees.
Also Read:
In contrast, Thailand stands out as the only producer expected to grow—about 0.8%—supported by stable weather and expanding planted areas.
Dry weather from May to July 2025 further worsened conditions in Aceh and North Sumatra by reducing soil moisture. While rainfall in August–September brought some recovery, the region still faces high risk due to potential La Niña conditions and monsoon transitions expected to trigger short-term dryness toward year-end.
Shifting Trade Flows: Indonesia Scales Back Exports, Malaysia Steps In
As Indonesia prepares for the rollout of B50, the country is expected to cut CPO exports by 1.5–3 million tons in 2025–2026. This reduction opens room for Malaysia to increase its exports by up to 1 million tons, while Thailand may gain better access to the European Union market due to its lower deforestation-risk status.
Indonesia’s export pattern continues shifting toward ASEAN markets and Sub-Saharan Africa, though South Asia remains a core destination. Meanwhile, Malaysia is seeing stronger demand from Africa, and Thailand stays focused on South Asian buyers.
Rising Domestic Consumption, Falling Regional Stocks
Domestic consumption is projected to rise significantly—especially in Indonesia, which will need an additional 1–3 million tons as the country moves toward B50. Malaysia is also seeing higher use from the food sector and ESG-driven biodiesel trials, while Thailand’s consumption remains relatively stable.
Regional palm oil stocks are expected to decline:
- Indonesia: ~2.5 million tons
- Malaysia: ~2 million tons
- Thailand: ~0.4 million tons
The combined impact of rising demand and weaker production is tightening inventories.
Prices Under Pressure but Expected to Stabilize in 2025/2026
Palm oil prices are currently weighed down by seasonal demand slowdown in India, a stronger ringgit, and movements in the global vegetable oil market. Still, Kian expects prices to remain stable through 2025/2026, supported by tightening stocks and seasonal factors.
Key variables that could move the market include:
- extreme weather and rainfall patterns,
- Indonesia’s B50 biodiesel policy,
- productivity risks and land-management issues,
- and global regulations such as the EUDR.
The EUDR is likely to act as a bearish factor due to higher compliance costs and trade uncertainty.
India–China Demand and Weather Remain the Market’s Biggest Drivers
Kian emphasized that demand from India and China—two of the world’s largest vegetable oil importers—will heavily influence market direction in 2026. At the same time, weather-related disruptions remain the biggest threat to supply stability.
Closing his presentation at ICOP 2025, Kian noted that the future of Southeast Asia’s palm oil industry sits at a critical crossroads. Strengthening efficiency, improving climate resilience, and responding swiftly to market shifts will determine the region’s long-term competitiveness. (P3)
