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Malaysia’s palm oil production rose 8.0% month-on-month to 1.63 million tonnes in June 2026, reflecting the seasonal production upcycle which typically starts in March. However, June 2026 output remained 3% lower than in June 2025, marking the fourth consecutive month of year-on-year decline.
Exports also rose by 6.1% month-on-month to 1.20 million tonnes in June 2026, although volume remained 4% below June 2025. The weaker performance was due to softer oils and fats consumption in major markets such as China and India amid the lingering impact of the West Asia conflict.
Vegetable oil prices in the European market recorded mixed performance in July. Palm oil and soybean oil prices increased by 3% and 6% month-on-month, while sunflower oil and rapeseed oil declined by 1% and 2% respectively. Strong biodiesel demand in the US and Indonesia continues to provide a structural price floor for soybean oil and palm oil.
Malaysia’s palm oil supply outlook remains favourable in the near term. MPOB data showed that production was broadly stable in 1H 2026, while stocks increased to 2.5 million tonnes in June. The resilience in production was driven mainly by a higher oil extraction rate (OER).
In the first half of 2026, the average oil extraction rate from fresh fruit bunches improved to 20.08%, up from 19.45% in the same period last year and the highest level recorded in a decade. The higher OER was likely supported by favourable rainfall in 2025, which improved the oil content of FFB harvested this year. However, if El Nino develops in early 2027, drier conditions could weaken the OER.
Oilseed production is expected to continue expanding globally, but growth in the three major oilseeds is forecast to slow in the 2026/27 season. Combined soybean, sunflowerseed and rapeseed output is projected to increase by only 16.5 million tonnes from a year earlier, well below the average annual increase of 22.7 million tonnes recorded over the past four years.
Global reliance on soybean oil, sunflower oil and rapeseed oil has increased since 2019 amid tighter exportable palm oil supply from Southeast Asia. Slower oilseed production growth, together with continued expansion in vegetable oil demand, particularly from the biofuel sector, is expected to keep vegetable oil prices supported.
Despite these longer-term supportive developments, near-term vegetable oil demand remains moderate across major importing markets. Vegetable oil stocks in India remained elevated despite the slowdown in imports, pointing to a weaker consumption amid inflationary pressure.
Nevertheless, restocking ahead of Diwali may support demand, as India normally imports around 30% of its annual vegetable oils requirements between July to September. Palm oil remains the most competitively priced major vegetable oil, making it well position to benefit from the seasonal restocking ahead of Diwali.
Looking ahead, crude palm oil prices are expected to trade between RM4,400 and RM4,650 per tonne in August. Prices will be supported by Indonesia’s B50 implementation from July, firmer energy markets and improved biodiesel economics. Renewed US-Iran tensions pushed gasoil prices up by 30% between early and mid-July, lifting gasoil prices above both palm oil and soybean oil. However, further price gains are likely to be limited by softer demand and elevated vegetable oil stocks in major consuming markets.
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Source: Online/GFMM
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