Indonesian Palm Oil Output Seen Falling 2.9% in 2027 to 56.8 Million Tonnes
Key Facts
The Indonesian Palm Oil Association (GAPKI) forecast the country's output would fall 2.9% in 2027 to 56.8 million metric tonnes, as dry weather continued to disrupt plantation maintenance. Reuters cited the association's estimates in a report published on September 2. Indonesia, together with Malaysia, is a key force in the palm oil market; the two countries together supply about 85% of global supply, according to an Associated Press report in September 2026. The production outlook puts Indonesia's crop at the center of attention on supply over the coming year. Bloomberg's report linked to the story covered the November 12, 2026 session, but palm oil price movements in that session could not be verified.
The 2027 forecast reflects a cut to estimates for this year as well. GAPKI estimated 2026 output, including crude palm oil and palm kernel oil, at 58.5 million metric tonnes, compared with a previous estimate of 58.8 million tonnes. The association said dry weather slowed fruit ripening, weighing on its crop estimate for the year. Its secretary general also said many companies had halted fertiliser application because of the drought. He said applying fertiliser in those conditions would be wasteful, as it could evaporate before the trees could benefit from it.
Production risks coincide with an expected increase in domestic palm oil consumption. Reuters cited a GAPKI official as saying Indonesian demand for biodiesel was projected to rise 18.5% in 2027 from the previous year, to a record 17.4 million tonnes. The official said higher domestic consumption alongside lower output was expected to cut the country's exports 14.9% to 26.5 million tonnes. That would be the lowest export level since 2016, according to the same estimate. The outlook combines an expected smaller crop with higher domestic demand, limiting the volume available for export, according to the association's estimates.
Indonesia's climate outlook points to a delayed rainy season of shorter duration across wide parts of the country. The head of the Meteorology, Climatology and Geophysics Agency (BMKG) said the concurrence of El Niño and a positive Indian Ocean Dipole was worsening and prolonging drought across most of Indonesia. He added that this was delaying the arrival of the rainy season and making it shorter. The agency forecast El Niño would continue at least until the beginning of the first quarter of 2027, with its peak intensity exceeding the strong El Niño category. It also forecast a gradual emergence of high-category rainfall in October and November 2026.
Near-term rainfall forecasts, however, do not point to uniform conditions across Indonesia. BMKG said rainfall from November 2026 to January 2027 was generally expected to range from the medium to very high categories. It forecast rainfall characteristics to range from below average to above average. The agency expects the peak of the 2026-2027 rainy season to occur in stages across seasonal regions: 155 regions in December 2026, 162 in January 2027 and 190 in February 2027. These dates set the timeframe the market is watching for improved rainfall after a delayed start. Crop and export estimates remain tied to the effects of dry conditions on trees and plantations in the coming period.
In September, the Malaysian Palm Oil Board forecast crude palm oil prices would remain above 4,700 ringgit per metric tonne during October and through the end of 2026. At the same time, it said rising inventories and falling energy prices posed downside risks to prices. The outlook provides market context ahead of 2027, alongside Indonesia's production and demand estimates. The board's estimate, however, concerns the price outlook through the end of 2026 and does not establish price movements in the November 12 session. Weather, supply and export developments remain among the factors that will shape the picture for Indonesian supply next year.