Global palm oil supply to tighten in FY27 amid biodiesel push and weather risks: SEA

Kolkata: Global palm oil supply is likely to remain constrained in FY27 due to biodiesel expansion, EL Nino effect and the ongoing geopolitical tension, said the Solvent Extractors Association (SEA), the apex body of edible oils in the country.

Malaysia and Indonesia are the two major palm pol producing countries in the world. The annual global palm oil production is 82 million tonnes. India annually imports 9 -9.5 million tonnes of palm oil to meet its domestic consumption.

With Indonesia’s shift toward B50 fuel, Malaysia’s to B15 and Thailand’s to B20, it’s quite evident how global palm oil trade is getting tighter in near future, said B.V. Mehta, executive director of SEA. “With India’s close partners ramping up their biodiesel mandates and diverting more palm oil toward domestic energy use, it’s bound to result in compressing exportable supplies from the region,” he said.

For India, this comes at a time when import dependence remains high and price sensitivity is elevated. The recent dip in palm oil imports reflects short-term demand adjustment due to high landed prices, but it does not alter the underlying structural reliance on imports.

Besides, the India Meteorological Department flagging a below-normal monsoon and the likelihood of El Niño conditions, the risk of higher import demand in the second half of the year remains significant if domestic oilseed output is impacted.

“Overall, the interplay of biodiesel expansion, weather risks, and geopolitics is setting the stage for a more constrained global palm oil balance going into 2026-27,” said Mehta as geopolitical disruptions around the Strait of Hormuz and evolving trade policies are adding layers of uncertainty to global supply chains.