Diwali demand masks bigger risk: Indonesia’s supply warning casts shadow on Palm oil prices ahead of 2027
Indonesia projects a 4–5 million tonne production decline and higher biodiesel consumption, but Dorab Mistry cautions that expensive oils could themselves weaken demand
As FMCG companies brace for Diwali demand, a looming palm oil supply challenge in Indonesia is looming over their 2027 input costs. Major edible oil firms like AWL Agri Business, Patanjali Foods, Bunge, and ADM Agro Industries face a procurement hurdle due to Indonesia's potential 4-5 million-tonne production decline next year, as warned by the world's largest palm oil producer.
Dr. Mohamad Fadhil Hasan of the Indonesian Palm Oil Association (GAPKI) expects a decline in output if El Niño-related weather disruptions occur, following stable production in 2026. Indonesia's domestic consumption could rise by 2 million tonnes if its B50 biodiesel blending program is fully implemented, potentially squeezing exports and pushing prices above 2026 levels.
However, Dorab Mistry, Director of Godrej International, remains cautious about a runaway price rally, stating that 2027's outlook is bullish but not super bullish. Patanjali Foods' CEO, Sanjeev Asthana, expressed concerns over higher edible oil prices as they could negatively impact FMCG companies' margins. The broader outlook remains worrisome, requiring close monitoring as Indian manufacturers face the dilemma of securing supplies ahead of a possible shortage or waiting for weaker demand to restrain prices.
Palm oil and its derivatives are extensively used in various food products, and higher international prices could squeeze manufacturers' margins, depending on sourcing contracts, product formulations, and their ability to pass costs onto consumers.
Written by urgent.news from Hindu BusinessLine's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
