India's purchases of Malaysian palm oil surge in July
In a statement yesterday, it said demand from India is expected to remain firm in September as importers stock up ahead of Diwali. Sub-Saharan Africa is also projected to maintain steady imports of about 300,000 tonnes, providing additional support for exports.
'Although Malaysian palm oil stocks have been rising since February, supply pressure remains limited. At the same time, Indonesia's biodiesel programme remains on track, consuming more than 1 million tonnes of palm oil monthly since February, preventing a stock built-up in the country, said MPOC.
The council said the biofuel market has exerted a strong influence on vegetable oil market in July and August.
Rising US domestic feedstock requirements have pushed US soybean oil prices to a significant premium in August – US$131 per tonne above Argentine soybean oil and US$148 per tonne above Malaysian palm olein. The strength in US soybean oil prices has lifted the broader vegetable oils complex.
Looking ahead, the USDA projects that 52% of US soybean oil production will be used domestically for biodiesel in 2026, rising by 1.5 million tonnes (26.7%) to 7 million tonnes. This surge in domestic use will sharply reduce export availability. US soybean oil exports are forecast to drop from 1.15 million tonnes in 2025 to just 310,000 tonnes in 2026.
Brazil's soybean oil exports may also struggle to expand despite record soybean harvests and higher crushing volumes, as the country raised its mandatory biodiesel blend from 14% to 15% on Aug 1. As a result, the global market will increasingly rely on Argentine supplies to cover the shortfall. This tightening in export availability is likely to support vegetable oil prices, including palm oil.
Indonesia is also considering raising its biodiesel mandate to B50 in 2026. If implemented, the policy would require about 16 million tonnes of palm oil annually for blending, up 3 million tonnes from an estimated 13 million tonnes in 2025. However, global palm oil output is projected to grow only by 1.6 million tonnes in 2026 to 83.1 million tonnes, with most of the increase coming from Indonesia, according to Oil World. With supply growth lagging behind biodiesel demand, palm oil prices are likely to stay firm.
On the supply side, Malaysia's production patterns have also shifted. In 2024, Malaysia's palm oil production peaked unusually early at 1.89 million tonnes in August, compared with the historical peak in October. Peninsular Malaysia recorded an exceptionally strong output in July 2025 of 1.12 million tonnes – the highest July production in a decade and also the highest monthly output for the region in 10 years.
This suggests that Peninsular Malaysia's production may have already peaked in July or could peak in August, before declining from September onwards. While Sabah and Sarawak have yet to reach their peak months, any downturn in Peninsular Malaysia from September is expected to cap national production growth for the rest of the year. As a result, Malaysia's palm oil stocks are unlikely to see a major built-up in September and October.
CPO prices have recently soared above RM4,500 per tonne and may remain volatile in weeks ahead. Despite the fluctuations, prices are expected to hold above RM4,300 in the near term.
Tightening soybean oil export availability, combined with the prospect of slower palm oil supply growth relative to biodiesel demand should provide continued support. However, the sustainability of palm oil's price strength will depend on its competitiveness against soybean oil in the export market.
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