The Malaysian Palm Oil Council (MPOC) has issued a statement predicting that crude palm oil (CPO) prices will remain stable at around RM4,400 per tonne in June, despite potential disruptions from El Niño weather patterns and uncertain trade flows. This forecast comes as a relief to the industry, as recent declines in vegetable oil prices were largely driven by profit-taking funds and speculators. However, supply risks remain elevated due to unresolved geopolitical tensions and the potential emergence of El Niño conditions, which could impact agricultural output in Southeast Asia.
MPOC highlights the typical drier-than-normal weather conditions associated with El Niño, which can reduce rainfall and soil moisture, affecting regional agricultural supply. The Malaysian Meteorological Department (MET) expects El Niño conditions to develop between June and July, potentially persisting into early 2027. This development could disrupt vegetable oil output in the upcoming season.
Despite these challenges, palm oil competitiveness has improved due to developments in the US biofuel sector. Soybean oil prices in Europe climbed to their highest levels since November 2022 in mid-May, making it the most expensive major vegetable oil. During this period, soybean oil traded at a premium of US$145 per tonne over rapeseed oil, US$110 per tonne over palm oil, and US$45 per tonne over sunflower oil in the global market.
MPOC notes that palm oil remains the most competitively priced vegetable oil in India, while Malaysian palm olein is trading at a slight discount to Argentine soybean oil, which could support demand. Malaysia's palm oil stocks rose marginally to 2.31 million tonnes in April, supported by seasonal production gains and improved harvesting conditions. Palm oil exports from January to April 2026 increased by 25.5% year-on-year, reaching 5.38 million tonnes, the highest since 2019.
However, there is a projected decline in exports between April and September, with combined exports from Malaysia, Indonesia, and Thailand expected to fall by 1.9 million tonnes. Oil World projections indicate a further drop of two million tonnes in the second and third quarters, primarily due to lower Indonesian shipments as more palm oil is redirected towards domestic energy use. Despite this, Malaysia's exports are projected to rise by 400,000 tonnes, while Indonesia's exports are expected to decline by 1.7 million tonnes.
The US Department of Agriculture (USDA) has projected record-high global oilseed production for the 2026/2027 season, with soybean output rising by 14 million tonnes, sunflower seed by seven million tonnes, and rapeseed by 1.4 million tonnes. Collectively, production of the three major oilseeds is forecast to increase by 4%, or 22.4 million tonnes, to a record 600 million tonnes.
In conclusion, while the MPOC's forecast for stable CPO prices in June is a positive development, the industry must remain vigilant due to the potential impact of El Niño and geopolitical tensions on supply. The improved competitiveness of palm oil in the global market and the projected increase in global oilseed production offer some relief, but the industry must continue to adapt to changing market dynamics and supply chain challenges.
