Malaysia’s Palm Oil Stocks Expected to Decline Amid Slower Output and Rising Export Demand

Malaysia’s palm-oil inventories are projected to decline toward the end of 2025 as domestic production eases while export demand continues to rise ahead of the festive season.

Analysts estimate that stockpiles could fall to approximately 1.7 million metric tons, reflecting the usual seasonal slowdown in harvesting and processing.

The Cause

Strong overseas demand, particularly from India and China, is expected to drive exports higher, which may provide short-term support for palm-oil futures that have recently been pressured by lower soybean oil prices.

Malaysia, the world’s second-largest palm-oil producer after Indonesia, typically sees production dips following the third quarter due to climatic patterns and crop cycles.

Further influencing regional supply, Indonesia has announced plans to increase its biodiesel blend requirement from 40% to 50% while also taking enforcement action on large plantation tracts to ensure regulatory compliance. These developments add further uncertainty to the supply outlook and may impact global price dynamics.

The Way Forward

The Malaysian Palm Oil Board (MPOB) has also emphasized the need for higher government allocations for replanting, proposing RM280 million for 2026, up from RM100 million in the current year.

The move aims to enhance long-term productivity, maintain competitiveness, and ensure sustainability in Malaysia’s palm-oil sector, addressing structural challenges in both yield and mechanisation adoption.

Credit: Reuters