Palm oil production in Malaysia may hit a monthly record in October, putting full-year output on track for the most ever, ahead of an expected slowdown next year, according to the nation’s top growers’ group.
Full-year output is likely to match or top the 20.28 million tonne record set in 2025, Roslin Azmy Hassan, head of the Malaysian Palm Oil Association, said in an interview. After supply peaks in October, output may ease in November and December, and then face constraints in 2027 on a persistent labor shortage and the lagged impact of the El Niño weather pattern, he said on Monday.
Palm oil has rallied 18% in 2026 even as stockpiles in Malaysia - the second-largest grower - recently swelled to a record. The commodity - widely used in foods and biofuels - has gained on the back of higher global energy prices caused by conflict in the Middle East, Indonesia’s expanded biodiesel mandate, and expectations the El Niño will lead to lower output in the months ahead.
The robust supply performance since June has been driven partly by replanted areas coming into maturity, as younger, higher-yielding palms replace less-productive trees, Roslin said. "The better planting material bears more fruit compared with the material used 25 years ago,” he said.
In September, output rose 16% from a month earlier to an all-time high of 2.12 million tonnes, according to official data last week. That helped to lift nationwide stockpiles 25% to 3.51 million tonnes, the figures showed. The existing record for the month of October was set last year at 2.04 million tonnes.
Still, the current strong harvest masks the impact of a labor crunch that could hurt supplies next year, Roslin said. Malaysia remains short of about 18,000 harvesters, potentially leaving 8.6 million tonnes of fresh-fruit bunches uncollected, leading to around RM8bil in lost revenue, he said.
Planters have been trying to cope with the labor shortage by diverting workers from maintenance and other duties into harvesting, Roslin said. But that isn’t sustainable and risks disrupting other essential work, including fertilizer application and general upkeep, he said.
Malaysia’s palm oil industry relies heavily on overseas labor, and growers have struggled to rebuild their workforce since the pandemic, when border curbs halted arrivals from countries including Indonesia. Since then, recruitment has been constrained by government quotas and tighter controls.
The labor crunch could form part of a double blow to production next year, with the industry also braced for the lagged impact of the El Niño, Roslin said. The consequences of the hotter, drier conditions associated with the phenomenon is expected to become apparent in the second half of 2027, he said.
"If you don’t bring in new workers next year, then you’ll see the impact on production,” he said.
In addition, a planned increase in Malaysia’s minimum wage next year could further squeeze plantation margins and force companies to cut outlays elsewhere, Roslin said, noting that production costs have climbed in recent years to about RM2,600 to RM3,000 a tonne.
Palm oil rose as much as 1.1% to RM4,821 a tonne in Kuala Lumpur on Monday, before trading at RM4,779 at 4:15 p.m. local time. Benchmark futures touched RM5,049 in mid-September, the highest intraday price since December 2024. - Bloomberg
