Malaysia’s independent palm oil mills face oversupply pressure on CPO sales

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Malaysia’s CPO oversupply pressure

Highlights

Malaysia’s palm oil inventories rose 24.54% month on month to a record 3.51 million tonnes in September, driven by a 16.48% increase in CPO production and a 12.13% decline in exports.
Some independent palm oil mills are struggling to sell CPO, causing unsold stocks to build up and raising the risk that purchases of fresh fruit bunches from 440,000 smallholders will be halted.
MPOB’s CPO spot price has risen 11.65% year to date to RM4,391 per tonne, potentially prompting buyers to switch to cheaper edible oils.

This article was translated from the original. Read the original version by our correspondent here.

Inventory pressure and risk of sales disruptions

As reported by The Edge Malaysia, local independent palm oil mills could face difficulties selling their crude palm oil over the next two months as refiners halt deliveries amid record-high inventories.

As refiners reduce their CPO purchases, some mills have already begun accumulating unsold stocks and running short of storage space. Industry sources said this could force mills to stop buying fresh fruit bunches from smallholders within weeks, since fresh fruit must be processed within one to two days of harvesting.

A palm oil market source said some unsold CPO had been stored for so long that its quality had deteriorated, leaving it off-specification and unsuitable for export. Another industry source said refiners began cutting CPO purchases from third-party mills as early as September, and difficulties securing new contracts could now persist until February 2027 without government intervention.

However, another source from the milling industry disputed claims of delivery disruptions, saying there were no problems delivering CPO to refiners in Peninsular Malaysia.

Impact on smallholders and the palm oil market

The risk to the supply chain is more pronounced because Malaysia has more than 440,000 independent and organised oil palm smallholders, who cultivate plots of less than 40.46 hectares. If mills stop buying fresh fruit bunches, these growers risk losing their entire income, rather than merely receiving lower prices.

Sandeep Singh, founder and director of palm oil trading and consultancy firm Global Farm Trade Sdn Bhd, warned that mounting stockpiles could have broader consequences for the supply chain. He said refiners are now prioritising supplies from their own mills, while third-party mills have to wait for purchase allocations from refiners.

Data from the Malaysian Palm Oil Board (MPOB) showed that Malaysia’s palm oil inventories surged 24.54% month on month to a record 3.51 million tonnes in September, up from 2.82 million tonnes in August. The increase came as CPO production rose 16.48% to an all-time high of 2.12 million tonnes, while palm oil exports fell 12.13% to 1.12 million tonnes.

CPO stocks alone rose 31.88% to 2.16 million tonnes, while processed palm oil inventories increased 14.33% to 1.35 million tonnes. Persistently high CPO prices could also prompt buyers, particularly in price-sensitive markets, to switch to cheaper edible oils. MPOB’s CPO spot price has risen 11.65% year to date to RM4,391 per tonne; MPOB is scheduled to release October palm oil supply and demand data on 10 Nov.

In our previous article, we discussed Malaysia’s decision to lower its crude palm oil (CPO) reference price for November to RM4,323.78 per tonne from October’s level. Although the reference price was lowered, the export duty remained at the maximum rate of 10% because the price was still above the RM4,050-per-tonne threshold, keeping export costs elevated and affecting the competitiveness of shipments.

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