Older estates, disease risks, and regional policy changes cloud palm oil outlook
Malaysia’s palm oil sector is facing mounting structural challenges as ageing plantations, plant disease, and shifting regional policies begin to weigh on future output and prices.
Aging Plantations Raise Production Concerns
Malaysia’s ageing oil palm plantations are expected to reach about 2 million hectares by 2027, up from around 1.7 million hectares today. Datuk Carl Bek-Nielsen, chairman of the Malaysian Palm Oil Council, said on Feb 10 that roughly 35 percent of plantations will be 19 years or older by 2027, compared to about 30 percent in 2026, increasing pressure on output from the world’s second-largest producer.
Disease Adds to Yield Decline
The productivity challenge is compounded by ganoderma fungal disease, which currently affects about 800,000 hectares of oil palm plantations. Mr Bek-Nielsen warned that yields have stagnated and, in some cases, regressed, stressing that older trees and disease exposure are reducing harvest potential across estates.
Stagnant Output Highlights Structural Limits
Malaysia produced 20.3 million tonnes of crude palm oil in 2025, according to data from the Malaysian Palm Oil Board. Average yields remain around 3.5 tonnes per hectare, well below industry targets. Mr Bek-Nielsen said the sector must urgently improve yield per hectare to avoid long-term supply erosion.
Replanting and Technology as Key Solutions
The industry believes productivity can be lifted through high-yield planting materials, which could raise average yields to 4.5 tonnes per hectare and push total output to 26 million tonnes by 2035. However, replanting cycles take time, meaning gains will not be immediate.
Government Support for Mechanisation
To support productivity, the Malaysian government has allocated RM20 million in 2026, approximately S$1.6 million, for automation and mechanisation in oil palm plantation technologies. Plantation and Commodities Minister Noraini Ahmad said the funding aims to reduce labor reliance and improve operational efficiency.
Indonesia’s Enforcement Campaign Shakes Supply
Regional developments are also influencing the market. Indonesia’s forestry task force seized about 4.1 million hectares of plantations in 2025 for operating illegally in forest areas. The enforcement campaign is expected to expand in 2026, targeting an additional four to five million hectares, potentially disrupting supply over the next six to eight months.
Biodiesel Policy and Price Outlook
Indonesia’s decision in January to scrap plans for a B50 biodiesel mandate in 2026, while maintaining its B40 policy, has added bearish pressure to the market. Mr Bek-Nielsen expects crude palm oil prices to trade between RM3,900 and RM4,000 per tonne in 2026, down from the 2025 average closing price of RM4,233.
Malaysia’s palm oil industry stands at a critical juncture, balancing ageing assets, biological risks, and shifting regional policies. How quickly producers adopt higher-yield technologies and how regional supply constraints evolve will shape market stability, with direct implications for trade flows, food prices, and energy policies affecting both Indonesians and Singaporeans.
Sources: Straits Times (2026) , Market Screener (2026)
Keywords: Crude Palm Oil, Oil Palm Plantations, Malaysian Palm Oil Council, Biodiesel Policy, Ganoderma Disease
