Benchmark palm oil prices FCPOc3 will average RM4,125 a metric tonnes this year, down 2.55% from 2025, according to the median estimate of 14 traders, analysts and industry participants.
The average CPO closing price rose 2.54% to RM4,233 in 2025 from RM4,128 the year prior, supported by Indonesia’s rollout of a mandatory B40 biodiesel blend, which contains 40% palm oil, despite an overhang of supply in the market.
Indonesia, the world’s largest producer and exporter of palm oil, had planned to raise the mandate to B50 in 2026, but Jakarta scrapped the proposal earlier this month, opting to retain B40 due to technical and funding constraints.
“The market had been betting on prices rising on expectations that Indonesia would need more palm oil for biodiesel blending,” said a New Delhi-based dealer with a global trade house.
“But with requirements no longer increasing, the focus has suddenly shifted back to supplies,” the dealer said.
Palm oil production in both Indonesia and second-largest producer Malaysia has been more robust than expected in recent months due to favourable weather, lifting Malaysian stocks to their highest level in nearly seven years.
“Palm oil price volatility in the first half of 2026 will hinge on weather conditions in Southeast Asia, US biofuel policies and the South American soybean crop,” said Anilkumar Bagani, head of research at Mumbai-based vegetable oil broker Sunvin Group.
“Palm oil prices regained competitiveness against rival soyoil since mid last year, which is expected to support prices,” said Malaysian Palm Oil Association CEO Roslin Azmy Hassan.
The Indonesian Palm Oil Association, GAPKI, estimated that Jakarta’s crude palm oil production in 2025 would reach a record 51 million tonnes from 48.16 million tonnes the previous year.
Indonesia’s output is expected to grow further to 51.2 million tonnes in 2026 the poll showed, a 0.39% increase.
“Output will likely edge higher in Indonesia as replanted company estates start harvesting, assuming favourable weather,” GAPKI chairman Eddy Martono said.
Malaysia’s output is seen declining marginally amid labour constraints and ageing plantations, though yields are likely to remain above average.
Malaysia is forecast to produce 19.75 million tonnes of palm oil in 2026, down 2.61% from last year’s record output of 20.28 million tonnes, but still above the 10-year average of 19.05 million tonnes.
Overall supplies are expected to remain ample, with Malaysian stocks rising to 3.05 million tonnes from 1.7 million tonnes a year earlier.