PALMOILMAGAZINE, JAKARTA — The global palm oil market is entering a critical phase ahead of 2026. As demand for food, energy, and downstream products continues to rise, supply growth is increasingly constrained by government policies, land availability, and sustainability challenges.
According to an analysis by Fastmarkets analyst Sathia Varqa, as cited by Palmoilmagazine.com on Monday (Jan 5, 2026), the global palm oil market now stands at a “crossroads.” For years, Indonesia has been the main engine of global palm oil supply expansion. That recovery momentum, however, is now clouded by uncertainty over land-use policies, while Malaysia—the closest competitor—faces stagnant planted areas and a gradual decline in yields.
On the production front, Indonesia is expected to post a recovery in 2026, with crude palm oil (CPO) output projected to rise by around 1.5–2.0 million tons compared with 2024 levels. Data from GAPKI show Indonesia’s production in the first nine months of 2025 jumped 11% to 39.60 million tons, pointing to the potential for a strong harvest year.
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Yet this outlook is tempered by significant risks. The Indonesian government has intensified efforts to regulate illegal oil palm plantations in forest areas. To date, around 3.3 million hectares of land have been seized, with 1.5 million hectares transferred to state-owned enterprise PT Agrinas and the remaining 1.8 million hectares still under verification. This situation could put an estimated 2–5 million tons of CPO production at risk in 2026, creating substantial uncertainty for global supply.
Meanwhile, Malaysia is expected to close 2025 with solid production performance, approaching a record 20 million tons. Favorable weather, improved labor availability, and better fertilizer application have supported strong yields, including the highest-ever monthly output recorded in November.
However, Malaysia’s outlook for 2026 is slightly weaker. CPO production is projected to decline by about 400,000 tons to 19.60 million tons, largely due to a natural crop “resting phase” following the heavy harvests at the end of 2025. Stagnant planted area at around 5.60 million hectares, continued reliance on foreign labor, and slow progress in replanting and mechanization are seen as limiting medium-term growth.
Against this backdrop, the balance of the global palm oil market in 2026 will hinge heavily on government policy direction, land governance, and the industry’s ability to reconcile sustainability demands with the world’s growing supply needs. (P2)
