Palm oil markets are caught between conflicting forces this week, with short-term policy pressures weighing on prices even as production data hints at potential supply constraints ahead.

BMD crude palm oil prices declined to $1,026/mt from $1,038/mt week-over-week, marking a pullback from recent levels. However, September’s average monthly price of $1,033/mt still managed to edge $7/mt above August, suggesting the decline represents a correction rather than a sustained downtrend.

Argentina’s policy move ripples across vegetable oil markets

The immediate pressure came from an unexpected source: Argentina’s currency crisis. Between September 22 and 24, the South American nation temporarily suspended export taxes on soybeans and their by-products, aiming to accelerate foreign sales and secure much-needed dollars to stabilize the flagging peso.

The brief window triggered rapid market action. India purchased 300,000 metric tons of soybean oil during the tax holiday, while Argentinian FOB crude soybean oil prices dropped $30/mt. The buying activity pressured competing vegetable oils, including palm oil, as the sudden availability of cheaper alternatives shifted purchasing decisions. Export levies automatically reinstated on September 24 after the sales cap established under Decree 682/2025 was met, but the market impact lingered.

Lower Brent crude prices added to the downward momentum, reducing the cost advantage palm oil typically enjoys in biodiesel applications.

Malaysian data reveals a potential supply puzzle

While prices declined, production data from Malaysia painted a more complex picture. Malaysian shipments in September ran 9% above August levels according to surveyors, suggesting strong demand continues to pull supply from the market.

Yet Malaysian Palm Oil Association (MPOA) production numbers for September 1-20 showed a 4.26% decrease compared to the same period previously. The combination of rising shipments and falling production raises questions about how long current supply levels can be sustained.

Indonesia’s export data added another layer to the supply narrative. Shipments for September 1-20 declined by 36% to 531,846 metric tons according to one surveying company. This sharp drop came despite GAPKI’s July report showing production at 5.6 million metric tons. Stocks reached only 2.568 million metric tons—up just 1.5% month-over-month—as strong export sales continued to draw down inventories.

Regulatory uncertainty extends into 2026

On the regulatory front, the European Commission proposed delaying the EU Deforestation Regulation (EUDR) by one additional year, citing IT system improvements needed for implementation. The proposal requires approval from a majority of EU Member States and the European Parliament.

If approved, the delay could reshape competitive dynamics between palm oil and alternative oils in European markets. GAPKI indicated that Indonesian palm oil exports to the EU could increase by 20% in 2026 to 4 million metric tons, driven by the new trade agreement between the regions and the potential EUDR postponement.


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