El Niño Threat Keeps Palm Oil Sector Outlook Positive Amid Mixed Yield Trends
Malaysia's palm oil yields fell slightly in the first eight months of 2026, but strong performance in Sabah and Sarawak offsets the decline, while a looming El Niño could tighten supply into 2027.
Despite hot weather and haze affecting much of Malaysia's oil palm regions, the first eight months of 2026 saw only a modest 1.5% year-on-year drop in average fresh fruit bunch yield, reaching 10.83 tonnes per hectare. Peninsular Malaysia experienced a sharp 7.8% decline, while the combined output of Sabah and Sarawak improved by 5.8% to 10.48 tonnes per hectare. Analysts caution that ongoing moisture stress could depress later harvests, especially as NOAA projects a 93% chance of a very strong El Niño from November 2026 to January 2027 and a 75% chance through February.
This climate risk is expected to tighten crude palm oil supplies and support prices into calendar year 2027. Consequently, MBSB Research keeps a "Positive" outlook for the plantation sector and suggests investors focus on upstream growers with strong Malaysian exposure, such as Ta Ann Holdings Bhd, Sarawak Plantation Bhd, and large-cap SD Guthrie Bhd.
Why it matters
Supply-side climate risks could tighten global palm oil markets and affect food and biofuel prices.
In this story
