Palm Oil Trade Flows Pivot as India Leans on Malaysia Over Indonesia

Argentina and Malaysia have overtaken Indonesia as India’s leading vegetable oil suppliers in 2025/26, with palm oil trade flows rebalancing toward Malaysia and away from Indonesia’s biodiesel-driven market. For palm oil, India’s overall import volumes remain high, but the supplier mix is changing just as Southeast Asian production plateaus and weather risks linger. India’s pivot is happening against a backdrop of record or near-record Malaysian stocks and still-firm Indonesian tender and futures prices. While absolute palm oil prices remain competitive versus soyoil, the new hierarchy of suppliers—Argentina in soft oils, Malaysia in palm—will shape premiums, freight patterns and negotiation leverage into early 2027.

Trade Flow Shake-Up and India’s Demand

India imported 3.42 million tonnes of vegetable oils from Argentina between November 2025 and September 2026, ahead of 2.97 million tonnes from Malaysia and 2.90 million tonnes from Indonesia in the same period. India’s total palm oil imports in 2025/26 are estimated at 8.4 million tonnes, compared with 5 million tonnes of soybean oil and 3.85 million tonnes of sunflower oil. Strong demand for soybean oil and sunflower oil from Argentina—boosted by reduced export taxes and the Black Sea sunflower shortfall—has allowed Argentina to become India’s largest overall vegetable oil supplier, while Malaysia has moved ahead of Indonesia in palm oil shipments into India.

Indonesia’s fall to third position is less about demand loss from India and more about rising domestic absorption. Indonesia has steadily diverted greater palm volumes to its biodiesel program since 2022/23, tightening exportable supplies. Malaysia and, to a lesser extent, Thailand have stepped in with more competitive offers and higher availability, enabling them to capture incremental Indian palm oil demand without materially raising India’s total palm import volumes.

Prices and Relative Competitiveness

Physical and futures benchmarks underline that palm oil remains attractively priced versus soft oils for India. Indonesian CPO tenders around mid-November are roughly flat on the week in local currency terms, with Bursa Malaysia third-month futures trading in the RM 4,400/t area, indicating a market that is firm but not spiking. Meanwhile, Indian spot RBD palmolein quotations are largely stable on 11–12 November, signalling that the recent reshuffle of suppliers has not yet triggered abrupt price swings at the consumer end.

Argentina’s tax cuts on soybean oil, combined with its ability to ship both soybean and sunflower oil, have sharpened competition for palm oil in certain Indian segments, especially refined and blended oils. However, palm’s intrinsic discount to soyoil remains a key anchor for India’s large-scale food manufacturing and HORECA sectors. The net effect is a more crowded supplier field—Argentina and China in soft oils, Malaysia and Indonesia in palm—but with palm still the volume workhorse for India’s edible oil basket.

Fundamentals: Production, Stocks and Policy

On the supply side, Malaysia’s palm oil inventories recently hit multi‑year highs as peak production months combined with softer export pace, though output is expected to ease seasonally from November onward. USDA projections and industry analysis point to relatively flat-to-slightly lower Indonesian output in 2026/27, constrained by earlier weather issues and sustained biodiesel demand. This mix—ample Malaysian stocks but tighter Indonesian export availability—helps explain why India is sourcing a growing share of palm from Malaysia despite Indonesia’s still-dominant plantation scale.

Indian policy remains an important swing factor. Recent moves include a cut in import duty on crude sunflower oil to 0%, which amplified Argentina’s gains in that segment but did not materially dent India’s appetite for palm oil, given its price advantage and refining base. In palm, India continues to favour crude palm oil imports over refined RBD palmolein for tariff and domestic refining reasons, which supports inbound flows from both Malaysia and Indonesia while also sustaining local value-add.

Weather and Short-Term Supply Outlook

Weather conditions across key Southeast Asian palm regions are transitioning away from the strongest El Niño phase, but lagged impacts on yields and ongoing rainfall variability keep a mild risk premium in place. Recent Malaysian industry commentary suggests that fresh fruit bunch output has likely peaked for the year and should soften into late Q4, while Indonesian production is under pressure from earlier dryness in some estates. For India, near-term palm oil availability looks comfortable thanks to high Malaysian stocks and active export programs, even as Indonesian export growth is capped by biodiesel demand.

In South America, weather is more critical for soy and sunflower oil than for palm directly, but it indirectly shapes India’s substitution between soft oils and palm. With Argentina now a key supplier of both soybean and sunflower oil to India, any weather-driven downgrade to its oilseed crops in 2026/27 would tend to push Indian buyers back toward palm, reinforcing Malaysia and Indonesia’s role in covering India’s structural import dependence.

Trading Outlook and 3-Day Directional View

Trading Outlook

• Indian refiners and importers: Consider modestly front‑loading Malaysian CPO purchases while stocks there remain high and Indonesia channels more oil to biodiesel, as the supplier shift grants India better leverage on Malaysian-origin discounts.
• Food manufacturers in India: Maintain a palm‑heavy formulation mix in the short term, using Argentine soft oils tactically where quality or branding requires, as relative pricing still favours palm for bulk applications.
• Producers in Malaysia and Indonesia: Malaysia should defend and expand its newly strengthened Indian market share via competitive freight and flexible contract terms, while Indonesia may need to rely more on non‑Indian markets as domestic biodiesel offtake stays strong.

3-Day Regional Price Indication (Directional)

• India (imported palm oil, CPO/RBD palmolein): Sideways to slightly firm over the next three days, with stable spot indications and no immediate policy shocks expected.
• Malaysia (CPO export values and futures): Mildly supportive bias as stocks begin to edge off seasonal peaks but remain ample; trade driven more by sentiment around Indian and Chinese demand than by fresh supply news.
• Indonesia (CPO tenders): Broadly steady levels, underpinned by biodiesel demand and cautious export offers, keeping Indonesian premiums over Malaysian origin contained but still present.