Core View: Neutral stance maintained this week as geopolitical tensions between the US and Iran escalate while Black Sea region risks remain unresolved. Market chatter emerged regarding haze affecting parts of Malaysia, with four locations in Sarawak flagged as potential risk zones. Combined with ongoing dry conditions across both Malaysia and Indonesia, weather forecasts suggest improving conditions for Malaysia over the next fortnight, though Indonesia's producing regions, particularly Kalimantan, are expected to remain relatively dry. Indonesia's official projections indicate a potential production reduction of around 4 million tonnes by 2027, which has supported stronger forward palm oil prices. However, a pullback in overseas agricultural commodities has triggered a period of consolidation for palm oil.
Where the market stands: Reports indicate that haze-affected areas are predominantly urban centers, with plantations largely unaffected by these conditions. Indonesia presents a more persistent concern, with fire counts in Kalimantan rebounding in early September before falling below the August 28 peak. Should dryness persist through late September, Indonesia would experience three consecutive months of drought, while Malaysia's dry spell is a more recent development, only beginning in August. This situation requires continued monitoring, particularly given that the current El Ni帽o event is expected to peak around November.
Supply dynamics on the ground: Malaysian palm oil production rose approximately 2% month-on-month in August, a period that included two national holidays, compared with July which had no such interruptions. Export inspection data through August 31 shows Malaysian shipments declining 14.9%, potentially pushing end-of-month inventories to 2.8 million tonnes. September production is expected to increase further on a monthly basis. With India's Diwali festival falling in early November this year, August imports of palm oil reached 780,000 tonnes, though the price competitiveness against soybean oil has diminished. September import volumes are expected to remain similar, with October likely seeing declines. Traders have resumed quoting September shipments after a brief pause, with four cargoes of October palm oil transacted this week. Continued buying suggests domestic inventory accumulation expectations remain intact, supporting a bearish spread structure in the near term. This pattern is unlikely to reverse while domestic palm oil continues building stocks alongside lackluster demand, though current price spreads are positioned at relatively low levels.
Updates from the rapeseed sector: Canadian canola harvesting has commenced, with Saskatchewan reporting 1% progress as of August 24, matching the pace from the same date in 2025 but below the 2% recorded in 2024. Alberta trails at 0.1% as of August 25, compared with 0.4% and 0.2% in the same periods of 2025 and 2024 respectively. While harvest progress has been slower than usual, overall production estimates remain solid at 21-22 million tonnes. Australia's official forecast was revised upward by 1 million tonnes to 7.3 million tonnes. Domestic markets have already priced in future rapeseed oil inventory accumulation, reducing the premium for Canadian canola. The canola-soybean oil spread for forward months has narrowed to around 1000 points, with limited downside expected in the near term. If Canadian harvesting delays persist, domestic rapeseed oil stock building could slow, potentially pushing the spread higher once again—suggesting a volatile path ahead.
Looking at the El Ni帽o impact: As El Ni帽o intensity strengthens and Indonesian dryness persists, forward palm oil prices have charted an independent upward trajectory, with current market pricing reflecting expectations of approximately 2 million tonnes in Indonesian production losses. The sustainability of this momentum hinges on US crude oil price movements and whether dry conditions continue. Medium-term weather projections through September to November indicate Malaysia and Indonesia—particularly the latter—will remain relatively dry.
International market snapshot: As of September 1, 2026, most edible oil prices rebounded, with European and Argentine sunflower oil the exceptions. North and South American soybean oil posted the strongest gains. Weekly data through August 28 shows Canadian canola leading declines, followed by German rapeseed and French sunflower seeds, while other oilseeds advanced.
Spread analysis: The FOB price differential between Malaysian and Indonesian refined palm oil stands at $13.50 per tonne, down from $43.50 the previous week, against a historical average of $7.16. Argentine soybean oil trades at a $34 per tonne discount to Indonesian crude palm oil, compared with a $50 discount previously and a historical average premium of $124.50. Weekly data through August 28 indicates Canadian canola prices fell sharply as markets absorbed harvest pressure, widening price gaps with other origins.
Indian import parity: As of August 31, the spread between crude soybean oil and crude palm oil at Indian ports stands at $10 per tonne, reversing from a negative $10 differential the prior week. Crude sunflower oil commands a stable $190 premium over crude palm oil, while refined soybean oil maintains a steady $10 premium over refined palm oil.
Import and crush margins: Partial data confirms four cargoes of October palm oil were transacted this week, with buying momentum continuing.
Weather monitoring: Soil moisture conditions across Indonesian and Malaysian palm oil regions, along with Canadian soil data, remain under observation for further developments.
Demand indicators: Physical edible oil trading volumes decreased as prices rallied. Basis levels for soybean and palm oil held steady on a weekly basis, while rapeseed oil basis weakened.
Inventory and price relationships: Stock levels and cash price differentials across the edible oil complex continue to be tracked closely in the domestic market, with monthly supply-demand balances indicating ongoing adjustments.