India seeks more palm oil from Colombia as Indonesia and Malaysia divert supplies to biofuel. Review current prices, supply risks and outlook in this concise report.
Prices
Indonesia has set its October 2026 CPO reference price at about USD 1,042.15 per metric tonne, up 3.44% from September, reflecting stronger benchmarks on the Indonesian and Malaysian CPO exchanges as well as higher Rotterdam values. This official uplift, combined with firmer biodiesel economics, has lent support to regional palm oil prices at the start of October, after a softer end to September. Market commentary points to mixed but generally constructive early-month trading in Malaysia and Indonesia as policy signals from Jakarta and a recovery in Malaysian futures improved sentiment.
With no major EUR-denominated palm oil quotations available from our internal price set at this time, current market assessment must focus on direction rather than absolute levels. The latest signals point to a moderately bullish near-term tone, driven by policy-led demand rather than a pronounced supply shock.
Supply & Demand
India is actively seeking to broaden its palm oil sourcing beyond Indonesia and Malaysia by exploring deeper trade cooperation with Colombia, Latin America’s largest palm oil producer. Colombia produces around 2 million tonnes of palm oil annually, while India has historically imported about 200,000 tonnes of Colombian crude palm oil. This positions Colombia as a meaningful, though secondary, supplier that can help India hedge against disruptions or tightness in Southeast Asian flows.
The diversification drive is a direct response to structural shifts in Southeast Asia, where Indonesia and Malaysia increasingly direct palm oil into domestic biofuel programmes. Higher blending mandates and attractive biodiesel pricing are absorbing more CPO, tightening the pool available for food-sector exports, particularly into major consuming markets such as India. As these trends deepen, India’s dependence on a narrow supplier base becomes a strategic risk, making Latin American origins more attractive despite longer freight distances and potentially higher logistics costs.
Fundamentals & Biofuel Drivers
Indonesia’s energy policy continues to anchor domestic biodiesel demand. The country is operating a mandatory B50 biodiesel programme, requiring diesel fuel to contain 50% palm oil-based biodiesel, with the October biodiesel benchmark price set at roughly IDR 15,072 per litre, slightly above September. This high blend rate structurally diverts large CPO volumes into energy use and strengthens the linkage between crude oil prices, biodiesel economics and palm oil valuations.
In Malaysia, progressive moves toward higher biodiesel blends and plans for B15/B20 expansion through 2026 underpin domestic consumption and reduce exportable surpluses over time. Together with Indonesia’s aggressive downstreaming, this means incremental growth in global palm oil demand is increasingly concentrated in the biofuel sector rather than food alone. For importers such as India, the net effect is a structurally tighter, more policy-sensitive palm oil market, where shifts in subsidies, blending mandates or crude oil prices can quickly alter export availability and price levels.
Weather & Production Outlook
Recent regional commentary suggests lingering dryness in parts of Indonesia and Malaysia, which could cap yield recovery and keep production growth modest in the near term. While no acute weather shock is evident at the start of October, the risk profile remains skewed toward limited supply upside rather than a bumper crop scenario. Under these conditions, any further policy-driven demand increase—especially for biodiesel—would likely feed through quickly into higher prices.
Colombia’s palm sector, at around 2 million tonnes annually, currently serves both domestic and export markets. Stable weather and agronomic conditions would allow Colombia to sustain or modestly increase exports, but capacity constraints and internal demand growth mean it is best viewed as a complementary, not replacement, origin for Indian buyers.
Market Outlook & Trading Guidance
Colombia is poised to emerge as a supplementary supplier for India, helping reduce dependence on Indonesia and Malaysia and improving supply security during tight export windows. However, the sheer scale of Indian demand implies that Latin American volumes will only partially offset any squeeze arising from Southeast Asian biofuel policies. As long as Indonesia and Malaysia prioritize domestic biodiesel programmes, food-sector buyers should plan for structurally firmer palm oil pricing and more frequent bouts of volatility tied to energy markets and policy decisions.
- Indian refiners & importers: Consider gradually increasing term coverage with Colombian origin where quality and logistics allow, while maintaining flexibility on Southeast Asian shipments to capture occasional dips.
- Food manufacturers: Hedge a portion of Q4 2026–Q1 2027 palm oil needs on price pull-backs, given rising biodiesel benchmarks and higher CPO reference prices in Indonesia.
- Producers & exporters (Indonesia/Malaysia/Colombia): Use the current firm tone to secure forward sales, especially into structurally growing markets such as India, while monitoring policy and crude oil moves that could further enhance biodiesel-driven demand.
3-Day Directional View (Key Exchanges)
*Directional view refers to expected price tendency, not specific price levels.