Malaysian Palm Oil Stockpiles Hit Record High on Output Surge

Malaysian palm oil stockpiles surged to an all-time high in September, driven by an unexpected output surge. The record inventories, which climbed about 22% to 3.45 million tonnes, surpassed the previous peak of 3.22 million tonnes set in December 2018. This sharp rise in supplies has contributed to a recent slump in palm oil prices, with benchmark futures in Kuala Lumpur dropping from a September high of RM5,049 to near RM4,535 on October 5.

The unexpected inventory growth has caught the market off guard, according to Jacquelyn Yow, regional head of plantation research at CGS International. "It’s a shock to the market that stockpiles would grow so suddenly," she said. The increase in production, which hit a record 2.11 million tonnes for September, has outweighed exports, which fell 12% to a four-month low of 1.13 million tonnes.

Despite the record stockpiles, analysts predict that inventories will peak in October before easing towards year-end as production slows and festive demand boosts exports. India, for instance, has recently increased its purchases ahead of Deepavali following cuts to import duties. However, reserves are expected to remain near record levels through the first half of 2027, according to Aditya Jeripotula, head of South Asia at DNext Intelligence SA.

The outlook for 2025-2026 has improved due to better plantation management and improving labor availability, according to the US Department of Agriculture. The agency raised its full-year production forecast to 20.2 million tonnes, although El Nino remains a key factor in determining future yields. The record reserves offer some buffer to the global palm market, which is expected to tighten in the coming months.