El Nino Threatens Palm Oil Supplies Amid Dry Weather
Prolonged dry weather linked to El Niño is expected to impact palm oil production in Indonesia and Malaysia, two of the world's largest producers.
A recent report from Bloomberg News estimates that Indonesian palm oil production will reach around 49 million tonnes in 2027, while Malaysian production is forecast at 19.5 million tonnes. This represents a decline of approximately 3% compared to previous years.
The dry weather has disrupted activities such as fertiliser application, harvesting, and transportation in major palm oil-producing areas like Kalimantan. The region is expected to account for the largest share of the production decline next year, according to trader Warren Tay from Eco Palm International Sdn.
Analysts surveyed by Bloomberg expect prolonged dry conditions to constrain palm oil supplies and potentially push the benchmark CPO price to 5,000 ringgit (around US$1,134 or Rp22 million at Rp4,406 per ringgit) per tonne in 2027. El Niño is currently underway, and its severity and duration will determine the extent of the impact on production.