Global Palm Oil Supply Constraints
Global palm oil supply is expected to remain constrained in the fiscal year 2027 due to various factors including biodiesel expansion in major supplier countries and geopolitical conflicts in West Asia.
Factors Affecting Palm Oil Supply
- Biodiesel Expansion:
- Top exporters like Malaysia and Indonesia are promoting biodiesel usage, which is tightening global palm oil trade.
- Indonesia has introduced B50 fuel, blending 50% crude palm oil-based biodiesel with conventional diesel, while Malaysia is rolling out B15 biodiesel.
- Thailand is also shifting to B20 biodiesel.
- Weather Conditions:
- The Indian Meteorological Department (IMD) predicts a below-normal monsoon due to potential El Niño conditions.
- This can impact domestic oilseed production, increasing import demand.
- Geopolitical Factors:
- Conflicts in West Asia may exacerbate energy supply disruptions, influencing palm oil supply chains.
Impact on India
- India imports approximately 9-9.5 million tonnes of palm oil annually to meet domestic consumption needs.
- The current dip in imports is due to high landed prices, representing a short-term demand adjustment.
- Long-term reliance on imports remains due to structural consumption needs.
According to B V Mehta, executive director at the Solvent Extractors Association (SEA), the combination of biodiesel mandates, weather risks, and geopolitical tensions is likely to result in a more constrained global palm oil balance heading into 2026-27.
