Indonesia and Malaysia, collectively responsible for 85 percent of palm oil production are experiencing problems in maintaining output. Recent data suggests a decline of approximately five percent year to date.  This is due to drought induced by the El Nino event, aging trees, cost reductions and a smaller available labor pool.

The USDA October Oil Crops Outlook confirmed that palm oil stocks declined 1.5 million tons from September to 16.1 million tons.  Production in Indonesia for the 2024-2025 season well down by 500,000 metric tons to 46.5 million metric tons. 

Indonesia will use a higher proportion of palm oil in biodiesel increasing blend from 25 percent to 40 percent. This will reduce availability and lead to higher vegetable oil prices.