Palm oil prices are likely to rise in the coming months due to uncertainty created by Indonesia’s land seizure policies and its planned biodiesel expansion, industry analysts said on Friday, reported Reuters.
Indonesian President Prabowo Subianto has intensified a crackdown on the palm oil sector, placing about five million hectares of plantations under review, of which authorities have seized around 3.7 million hectares. Analysts say the seizures will disrupt productivity, though opinions vary on the potential severity.
Thomas Mielke, executive director of Hamburg-based forecasting firm Oil World, told an industry conference in Bali that Malaysia’s benchmark palm oil contract could climb to RM5,000 (US$1,183.71) per metric tonne within the next six months. At the same event, Dorab Mistry, a director at India’s Godrej International, said Malaysian futures could reach RM5,500 a tonne between January and March if Indonesia continues seizing plantations and advances its B50 biodiesel plan.
The benchmark contract closed at RM4,125 on Friday.
Analysts warned that Indonesia’s land seizures will curb investment in fertilisation and cultivation. “Production will start coming down from the second, third month onwards,” Mistry said, while still expecting Indonesia’s output to edge higher in the 2025/26 season. Mielke, however, anticipates production will begin to be affected from mid-2026.
He noted that the pressure from land seizures compounds other challenges, including declining yields from aging trees and slow replanting. Mielke expects Indonesia’s palm oil output to fall to 49 million tonnes in 2026 from 49.4 million tonnes this year, with the decline continuing into 2027.
The Indonesia Palm Oil Association (Gapki) offered a more optimistic outlook, forecasting a 3% to 4% production increase in 2026, supported by favourable weather and newly mature plantings. Yet, spokesperson Fadhil Hasan acknowledged concerns over the seizures, stressing the need for “balanced enforcement” to keep production impacts moderate and temporary.
Indonesia’s plan to raise the mandatory biodiesel blend to 50% in the second half of next year is another key factor expected to push prices higher, as it will reduce the volume available for export. Mielke estimated the B50 mandate would require an additional 2.2 million tonnes of palm oil for biodiesel production.
Gapki is assessing different implementation scenarios and their implications for domestic consumption and levy collections, which fund the biodiesel programme. Fadhil said that regardless of the final policy, export levies will likely be increased due to the widening price gap between palm oil feedstock and diesel fuel.
Indonesia imposes levies on palm oil exports to subsidise its biodiesel scheme. Higher bio-content blending could necessitate a levy increase of up to 7.5%, according to Julian McGill, an analyst at Glenauk Economics.
