Production and stocks
Malaysia’s crude palm oil production jumped 9.4% month-on-month to 1,792,979 tonnes in July 2026, according to MPOB’s latest data. The increase reflects the seasonal peak and available harvesting labour, although El Niño conditions—with an ONI of +1.4 and dryness in Sarawak and Kalimantan—could temper output in coming months. Closing stocks rose 7.2% to 1,429,316 tonnes, pushing the stocks-to-use ratio to 12.5%. This build signals a well-supplied market and adds to bearish sentiment, as it exceeded some industry estimates.
Exports and imports
Exports climbed 14.5% on-month to 1,392,178 tonnes, a solid rebound likely tied to restocking by key buyers ahead of festivals and competitive Malaysian pricing relative to Indonesia’s reference of $1,030/MT. However, imports plunged 51.9% to just 49,566 tonnes, suggesting weak domestic uptake for foreign oils or ample local supply. The net trade balance improved, but the stock increase underscores that overseas demand was not strong enough to absorb the production surge fully.
Upstream FFB prices
Fresh fruit bunch reference prices rose 1.2% to RM 49.50 per tonne, offering marginal relief to growers despite a slightly softer CPO benchmark at RM 4,511/MT (about $1,102/MT). This divergence may reflect localised processing margins or quality differentials. For plantation operators, the modest uptick helps buffer against rising input costs, but the broader price trend remains cautious.
Impact on downstream sectors
- Food and oleochemicals: The stock build and potential for further CPO price weakness could bring cost relief to manufacturers of shortening, soap, and oleochemicals. If the bearish outlook materialises, margins in these industries may improve in the second half of 2026.
- Biodiesel blending: With Brent crude at $84/bbl and the Malaysian CPO price at $1,102/MT, the palm oil-gas oil spread remains favourable for discretionary blending, but falling crude prices erode this advantage. Indonesia’s structural B50 mandate provides a floor for demand, cushioning the market from oversupply.
- Key importers India and China: Weak import demand from both nations was cited in our model outlook. Rising Malaysian inventories and a friendly FOB price environment could allow Indian and Chinese buyers to secure volumes at competitive premiums, but elevated El Niño risk may prompt some early stockpiling, introducing a wild card.
Near-term price direction
The July MPOB figures present a bearish near-term picture. The combination of a production-led stock build, a 0.4% drop in Brent crude, and tepid buying interest from Asia’s largest importers outweighs the supportive factors such as the wide BOPO spread and El Niño jitters. Our model outlook points to downward pressure on CPO prices, with the benchmark RM 4,511/MT potentially testing lower levels. However, uncertainty is high: the upcoming MPOB release in about three days and further energy market moves will be decisive in setting the short-term trajectory.