El Niño Forecast to Hit Palm Oil Production with Delays
The emergence of El Niño towards the end of 2026 is expected to negatively impact palm oil production in Malaysia and Indonesia in 2027-2028.
According to SD Guthrie, a major palm oil producer, the impact of hotter and drier weather on plantation yields typically emerges with a 12-16 month lag. This means that palm oil production will likely remain unaffected through the rest of this year.
However, Wilmar International has reported declining rainfall in Kalimantan since July, where 70-80% of its Indonesian estates are located. CIMB Securities warns that a prolonged dry spell could significantly affect yields in 2027-2028.
The risk of lower production comes amid an already tight global vegetable oil supply outlook. SD Guthrie expects tightening global supplies and resilient demand to keep crude palm oil (CPO) prices elevated, while the emergence of El Niño could further intensify supply-side pressure.