Malaysia's palm oil inventories likely climbed to a record 3.45mn tonnes at the end of September, as output surged to an all-time high for the month and exports fell to a four-month low, a Bloomberg survey showed, with the El Niño dry spell over the country's plantations yet to show up in supply.

Stocks are estimated to have risen about 22 per cent from August, according to the median of 10 estimates from plantation executives, traders and analysts in the survey published on 5 October. That would surpass the previous record of 3.22mn tonnes set in December 2018.

The Malaysian Palm Oil Board (MPOB) releases the September data on 12 October.

The survey puts September output up 16 per cent at 2.11mn tonnes, the highest ever for the month, and exports down 12 per cent at 1.13mn tonnes. Stockpiles had already risen for a fifth straight month in August, to 2.82mn tonnes, according to figures the board published on 10 September.

An estate worker in yellow boots carries a long-poled harvesting sickle between rows of mature oil palms, a cut fruit bunch on the ground in front of him

Other forecasts are lower. Anilkumar Bagani, research head at Mumbai-based broker Sunvin Group, said stocks could exceed 3.1mn tonnes, while Dorab Mistry, director at Godrej International, put them above 3mn tonnes, Reuters reported. Both are below the 2018 high.

The US Department of Agriculture's office in Kuala Lumpur, in a report on 1 October, estimated end-September stocks at 2.68mn tonnes, below the board's August figure.

Production has beaten expectations all year. In the same report, the USDA office raised its estimate of Malaysian output for the year to September to 20.2mn tonnes from 20mn tonnes in July, "supported by improved yields due to better plantation management, improving labor availability, and favorable weather".

DRY SPELL YET TO BITE

All 14 of Cropli's monitoring points in Malaysia's palm belt received between 58 and 88 per cent of their 1991–2020 average rainfall from 1 August to 5 October, Cropli weather data showed, and every one was drier than over the same weeks of 2023, the last El Niño year.

[chart slug="malaysia-palm-stocks-record-rainfall-vs-2023"]

August accounted for most of the shortfall, with Sibu, Bintulu and Miri, in the Borneo state of Sarawak, receiving about a quarter of their normal rain.

Rainfall largely recovered in September, with nine of the 14 points at 90 per cent of normal or more.

Three of the five that fell short were on the east coast of Sabah, where Sandakan, Lahad Datu and Tawau received 69 to 78 per cent. In Indonesia's Central Kalimantan, Sampit took 34 per cent of normal over the full period.

[explore layer="origin-chart" originId="oil-palm-malaysia" pointId="malaysia-palm-sibu" tab="precip-history" snapshot="es_2651a5b5b86c1643" title="Rainfall at Sibu, Sarawak" subtitle="Monthly rainfall totals, January–September 2026 (red) against earlier years at the same point. August's 52mm was about a quarter of the 1991–2020 normal"]

Oil palm responds to drought with a lag of months. The Malaysian Palm Oil Council said on 22 September that dry weather had become more pronounced since early August, raising concerns about production in six to nine months.

"The current high stock level is therefore likely to be temporary," the council said, adding that production and stock levels in both Malaysia and Indonesia were expected to ease in the coming months.

The Malaysian Meteorological Department puts the chance of a historic El Niño in October to December at 69 per cent, the USDA's Kuala Lumpur office said.

[crop-model slug="oil-palm" loc="indonesia" stage="Harvest" view="bunch" stress="drought" title="Why a dry spell now means fewer palm oil bunches later" subtitle="An oil palm at harvest after a five-month drought, in Cropli's 3D model. Dry weather while the flowers form turns more of them male or kills them, so fewer bunches ripen, with yields falling up to two years on"]

"While the El Niño peak occurring during monsoon season is expected to lead to higher production initially due to less flooding, continued lack of rain will pose a downside risk to late MY2026/27 yields," it said, referring to the year to September 2027.

Mistry said El Niño could curb production in 2027, although new seed varieties are more resilient to dry weather, according to Reuters.

"September's production was supported by favourable weather and we may even see full-year production surpassing 2025's record, although that would depend on weather conditions in the October-December months," said Aditya Jeripotula, head of South Asia at research firm DNext Intelligence SA. "El Nino is the key here."

He expects stocks to peak in October but "remain high near record levels through the first half of 2027".

PRICES UNDER PRESSURE

Benchmark palm oil futures on Bursa Malaysia Derivatives have slid to about 4,535 ringgit a tonne on 5 October from a September peak of 5,049 ringgit (about $1,240).

The physical market never followed the rally: MPOB's price for crude palm oil delivered locally stayed below 4,670 ringgit through September and fell to 4,364.50 ringgit on 2 October, its lowest since 11 March, according to MPOB data accessed via Cropli.

The council had forecast prices above 4,700 ringgit for the rest of the year, while Jacquelyn Yow, regional head of plantation research at CGS International, told Bloomberg prices would likely stay under pressure at 4,300 to 4,500 ringgit.

[explore layer="prices" price="ds:495232" pperiod="365d" pto="2026-10-07" title="Malaysia's physical palm oil price" subtitle="MPOB crude palm oil, local delivered, ringgit a tonne, daily, January 2024 to 5 October 2026"]

Malaysia has lost export share to cheaper Indonesian oil, and edible oil stocks in importing countries are near record levels, Jeripotula said.

India, the world's biggest vegetable oil importer, cut its basic customs duty on crude palm and crude soybean oil to 5 per cent from 10 per cent on 24 September and has stepped up purchases ahead of the Diwali festival, buying more than 200,000 tonnes in recent days, Bloomberg reported.

Indian refiners have favoured soybean oil. Soyoil imports rose 26 per cent to a record 628,736 tonnes in August, while palm oil imports rose 7 per cent to 782,761 tonnes, the Solvent Extractors' Association of India said.

Soyoil is available at competitive prices compared with palm oil, a New Delhi-based dealer told Reuters. AWL Agri Business, formerly Adani Wilmar, said on 5 October that its edible oil volumes rose 3 per cent in the quarter to September, "led by healthy performance in domestic oils, particularly Mustard Oil and Rice Bran Oil".

Brazil's soybean oil shipments to India rose 59 per cent from a year earlier to 1.23mn tonnes in the first eight months of 2026, more than in the whole of 2024 or 2025, according to Brazilian government trade data.

[explore reporter="br" flow="exports" products="1507" partner="IN" period="monthly" metric="quantity" view="chart" years="2018-2026" title="Brazil's soybean oil exports to India, 2018–2026" subtitle="Monthly shipments, tonnes, January 2018 to August 2026. July 2026's 269,000 tonnes is the largest month in the series"]

The USDA's New Delhi office expects "a substitution effect, with consumers and processors shifting from palm oil toward soybean oil", though it still forecasts India's palm oil imports rising to 9mn tonnes in the year from October, from 8.7mn tonnes.

Domestic demand in Malaysia will absorb little of the surplus.

The move to a 15 per cent biodiesel blend from 10 per cent, phased in from 1 June, raises annual crude palm oil use to 801,000 tonnes from 534,000 tonnes, on government figures. That is about 22,000 tonnes a month more, against a September stock build of about 630,000 tonnes implied by the survey.

Supply is expected to tighten next year. Indonesia's palm oil exports will drop 14.9 per cent to 26.5mn tonnes in 2027, the lowest since 2016, as output falls and biodiesel use climbs to a record, Eddy Martono, chairman of the Indonesian Palm Oil Association, told Reuters on 5 October.

Palm oil could trade at a premium to soybean oil in 2027, as it did in 2024, he said.

The Solvent Extractors' Association is due to publish India's September import figures, the first to include the lower duties, in mid-October.