MDEX Palm Oil Holds Above 4,500 MYR Amid Soy Complex Weakness

Palm oil futures on the MDEX are consolidating slightly higher above 4,500 MYR/t on the front contract, even as the broader oilseed complex (soybeans, rapeseed, canola) softens. The curve remains moderately upward-sloping into mid‑2027 before easing from late‑2027 onward, pointing to near-term tightness but expectations of better-balanced fundamentals further out. The current move comes after profit‑taking in palm oil following Tuesday’s rally, while soybeans, soy oil and rapeseed have been under pressure from strong harvest progress, record US soybean output and comfortable global supply expectations. At the same time, Malaysian palm stocks have risen sharply, yet still trade against a backdrop of robust structural demand from biodiesel and food uses, and a tightening export stance in Indonesia. This leaves palm oil trapped between bearish near‑term stock data and supportive medium‑term demand and energy-linked pricing.

Prices & Term Structure

The MDEX forward curve shows a firm nearby market with moderate contango into mid‑2027 and a softening thereafter:

The slightly higher nearby contracts reflect current support from energy markets and biodiesel demand, while the gentle decline beyond late‑2027 signals expectations of improved production and more comfortable stocks.

Supply, Stocks & Demand

On the vegetable oil complex side, soybeans and related products are under clear pressure. Chicago soybean futures have fallen for nine sessions in a row, with the nearby contract at its lowest level since late August, while rapeseed on Euronext and canola in Winnipeg have also posted multi‑day losing streaks linked to weaker soy oil prices. This broader softness tempers upside in palm oil despite its own supportive factors.

Fundamentally, palm oil is grappling with a sharp rise in Malaysian inventories. Official data show Malaysia’s total palm oil stocks surging by almost 25% month‑on‑month in September to around 3.5 million tonnes, driven by rising output and weaker exports. Market participants expect stocks to peak in October at or near a multi‑year high, before gradually easing from November as seasonal production slows and export programs catch up.

On the demand side, structural drivers remain constructive. Indonesia is rolling out a stricter governance framework for palm oil as a strategic export commodity, including new rules under Government Regulation No. 24/2026 and Trade Regulation No. 16/2026 that tighten control over export flows and coordinate them through designated state‑linked entities. At the same time, the planned move toward higher biodiesel blending rates (e.g. a B50 mandate) is set to increase domestic consumption and reduce export availability over the medium term.

Link to Soy Complex & Other Oils

The current palm oil price formation is heavily influenced by developments in the soy complex and other oilseeds:

• US soybeans: The US market faces favorable harvest weather and expectations of a record soybean crop around 124 million tonnes, pressuring futures and soy oil prices.
• South America: Brazil’s soybean planting is progressing smoothly, and Argentina’s 2026/27 soybean crop is forecast near 48–50 million tonnes, underscoring ample future supply.
• Rapeseed & canola: Euronext rapeseed and ICE canola have declined for multiple sessions, mirroring the weaker soy oil market and weighing on the broader vegetable oil complex.

This combination of abundant soy and rapeseed supply caps palm oil’s ability to decouple on the upside, particularly while Malaysian stocks are elevated. Nevertheless, the MDEX curve’s resilience above 4,500 MYR/t suggests that energy-linked demand and Indonesian policy constraints are preventing a deeper correction for now.

Weather & Production Outlook

Weather remains a key swing factor for 2027–2028 supply. Regional outlooks point to El Niño conditions influencing rainfall patterns across Southeast Asia, with an increased probability of below‑normal precipitation over parts of the Maritime Continent. Such patterns typically affect fresh fruit bunch yields with a lag, implying that any prolonged dryness in late‑2026 and early‑2027 could tighten supplies and support prices later in 2027.

For now, Malaysian output has been robust, with production in recent months rising to multi‑year highs for the season, contributing to the current stock build. Market consensus, however, anticipates a turning point around October–November as seasonal production peaks and then eases, while the lagged impact of less favorable weather gradually emerges in mid‑2027.

4–6 Week Market Outlook

• Near term (late Oct–Nov 2026): Elevated Malaysian stocks, profit‑taking after recent rallies and pressure from record soy supplies argue for a consolidation or mildly softer tone in MDEX palm oil, especially if energy prices stabilize.
• Medium term (Dec–Q1 2027): As Malaysian inventories start to edge lower with seasonally weaker production and steady exports, and as Indonesian policy continues to prioritize domestic biodiesel demand, the downside in palm oil appears limited relative to soy oil.
• Weather & policy risk: Any signs of stronger El Niño‑linked yield stress or additional tightening of Indonesian export procedures would be price supportive and could steepen backwardation in the nearby months.

Trading & Hedging Recommendations

• Physical buyers (refiners, consumers): Use current contango out to mid‑2027 to secure a portion of forward coverage while stocks are high and the soy complex is weak, but stagger purchases in tranches in case of further near‑term corrections.
• Producers: Consider incremental hedging on strength in the May–Aug 2027 contracts around and above 5,000 MYR/t, given the visible stock overhang and strong linkage to cheaper competing oils.
• Spread strategies: Monitor MDEX nearby vs. distant spreads; a further build‑up in Malaysian stocks could flatten the curve, while signs of falling inventories and stronger biodiesel demand would favor re‑steepening.

3‑Day Directional Outlook (Futures)

• MDEX CPO nearby (Nov 2026): Slightly softer to sideways as traders digest high Malaysian stock data and continued weakness in CBOT soybeans and global vegoils.
• Deferred MDEX (Jan–May 2027): Range‑bound with a modestly firmer bias versus the nearby, supported by expectations of gradual inventory drawdown later in Q4.
• Relative value vs. soy oil: Palm oil likely to maintain a discount but with limited widening, as Indonesian export controls and biodiesel policy underpin structural demand.