The global vegetable oil market is undergoing a structural shift. The core characteristic is the deceleration of palm oil's growth engine, while the cultivation areas for soft oils like soybean, sunflower, and rapeseed are expanding rapidly to fill the gap. Data indicates that global palm oil exports have shrunk from a peak of 55.3 million tons in 2018/19 to 49.3 million tons in 2024/25. Palm oil's share of global exports for 17 major oils and fats has also declined from 57% seven years ago to approximately 50%. This downturn is primarily constrained by government intervention in Indonesia and aging plantation issues in Malaysia. The recent palm oil conference in Kuala Lumpur drew significant market attention. Here are the key takeaways:

1. A structural supply deficit is evident globally for vegetable oils, mainly due to slowing palm oil area expansion contrasted with a surge in soybean area. POC experts anticipate this deficit will lead to higher price floors, with palm oil forecasted at $1,000-$1,350 per ton in 2026. Palm oil's supply insufficiency increases global reliance on soybean, sunflower, and rapeseed oils.

2. Malaysia's palm oil supply is constrained by aging trees and disease. The Malaysian Palm Oil Council Chairman highlighted severe plantation aging: by 2027, 35% of the area will have trees older than 19 years. Furthermore, 800,000 hectares are infected with Ganoderma disease, creating a production bottleneck. The government has allocated MYR 20 million to support automation to alleviate pressure.

3. Indonesia's land seizure policies heighten supply uncertainty. The government confiscated 4.1 million hectares of illegal plantations in 2025 and plans another 4-5 million hectares in 2026. These changes, coupled with reduced fertilizer use and management issues, are expected to significantly lower yields, with impacts likely visible after Q3 2026. The delay of the B50 biodiesel program to 2027 also weakens biofuel demand support.

4. Soybean oil competition threatens palm oil's advantage. Soybean oil production growth is six times that of palm oil, eroding the latter's low-cost edge. This substitution risk forces the industry to focus on sustainable production innovations. While palm oil remains the largest consumed oil globally, soybean oil's share encroachment is an inevitable trend.

5. Biofuel policies are a critical demand variable. A potential robust US biodiesel plan could push soybean oil prices higher, while Indonesia's B50 delay curbs palm oil demand growth. Low crude oil prices create significant subsidy pressure for palm oil-based biodiesel in some markets.

6. Technological innovation is addressing yield bottlenecks. Trials with semi-dwarf oil palm varieties show promise for increasing harvesting efficiency. Malaysia aims to break through production ceilings via automation and improved planting materials, though recovery remains slow.

7. Climate and geopolitical factors amplify supply risks. A warming climate increases natural disaster costs affecting global supply chains. Potential El Niño-induced droughts could further constrain palm oil output, while trade policies add uncertainty.

8. Demand trends in India and China are diverging. A clear gap exists between global consumption growth and production growth for edible oils. India's rising imports are helping reduce palm oil stockpiles in producing countries, while demand in China appears softer.

In the short term, palm oil inventories in producing regions are gradually decreasing. From a longer-term industry structure perspective, the palm oil sector has lost growth momentum. The rate of expansion for mature palm oil area has slowed dramatically due to moratoriums on new plantations and insufficient replanting of aging trees.

Soybean oil prices have reached new highs, influenced by policies like the US 45Z tax credit, which favors North American-sourced feedstocks and improves soybean oil's carbon intensity score. The current market narrative revolves around biofuel policies and supply dynamics in major producing countries. While palm oil faces near-term pressure, this ample supply situation may shift after April-June 2026, leading to a renewed focus on supply-demand balance. A more optimistic outlook for future prices is warranted.