El Niño Forecast Crimps Indonesia's Palm Oil Output
Indonesia's palm oil production is expected to decline by up to three million tonnes next year due to severe El Niño weather conditions, according to an industry estimate. This would represent a dent in output equivalent to roughly 5% of this year's total.
The country's farmers are already struggling to apply fertiliser due to hot and dry conditions, with the impact of this likely to be visible in next year's harvest. Eddy Martono, chairman of the Indonesian Palm Oil Association (Gapki), said production may still decline but probably by around three million tonnes next year.
El Niño conditions are setting in across most regions, with some plantation areas receiving rainfall that has reduced the forecasted output decline from four to five million tonnes. However, this will not affect domestic use of palm oil, as Indonesia prioritises supply for its expanded biodiesel mandate set to be implemented fully in October.
The reduction in supply will compound pressure on the global palm market, which is already expected to tighten due to Indonesia keeping more oil onshore. Benchmark palm oil prices rose up to 1.2% before paring slightly to trade at RM4,859 per tonne in Kuala Lumpur, with futures for November delivery affected by Gapki's revised output estimate for 2027.