Palm oil production rises, B50 biodiesel mandate uncertainty drags on prices

Malaysian palm oil futures declined 1.6% to MR4,245/mt ($1,012.52) on Oct. 29 during afternoon trade as markets grappled with increased production forecasts from top supplier Indonesia and growing doubts over the viability of its ambitious biodiesel mandate expansion.

Weak fundamentals are weighing on benchmark palm oil futures on Malaysia's commodities exchange, which have seen an extended decline this week and are currently down 7.5% from the year-high of $1,090/mt hit on Oct. 9, according to analysts and market participants

There is a cloud of uncertainty if Indonesia can implement its raised B50 biodiesel mandate in 2026 while its palm oil trade body forecast a 10% increase in production this year. There is a selloff in Chinese RBD Palm olein, soy oil on the Dalian commodity exchange and ZCE Rapeseed oil futures, along with weakness in CBOT soybean oil futures Oct. 28, Anilkumar Bagani, head of research at vegetable oil brokerage Sunvin Group, told Platts Oct. 29.

Dalian's most active soyoil contract was down 1.29% to Yuan 8,098/mt ($1,140.68), while its palm oil contract fell 2.02% to Yuan 8,802/mt during Oct. 29 afternoon trade, exchange data showed.

Palm oil tracks the price movements of rival edible oils as it competes for a share of the global vegetable oils market.

Indonesia's plan to increase its palm oil-based biodiesel blending mandate from 40% to 50% in 2026 had raised concerns of supply tightness in the vegetable oil market, as the country accounts for 33% of the world's vegetable oil exports.

It is a culmination of production news, both from Malaysia and Indonesia, as there is a sudden surge from both nations, said Lingam Supramaniam, director with vegetable oil brokerage Pelindung Bestari at Port Klang, Malaysia.

On the export front for Malaysia, palm oil shipments during Oct. 1–25 fell by about 0.3%–0.4% month-over-month, according to cargo surveyors ITS and Amspec, reinforcing expectations of softer demand.

Malaysia's production is expected to rise 5% month over month, while exports may rise marginally over the month before, Supramaniam said.

Data from the Southern Peninsular Palm Oil Millers Association on Oct. 28 showed that production was up 2.8% for the first 25 days of October compared to the same period in September.

Many industry participants and farmer agencies in Indonesia are complaining about the added burden of a B50 mandate, which may delay Jakarta's B50 plan to 2027. Also, Malaysian production is strong right now, and end-October stocks may rise to 2.5 million mt, Tushar Agarwal, an India-based vegetable oil analyst, told Platts.

Platts, part of S&P Global Commodity Insights, assessed crude palm oil FOB Indonesia at $1,175/mt Oct. 28, down 0.45% day over day.