Palm oil: Cycles

A ten-year swing from $535 to $1,777

Palm oil averaged $1,180/t in September 2026, against $1,037 a year earlier and $1,181 five years earlier. The ten-year range is $535 to $1,777. In 2010 dollars the price fell from $1,075 in 2011 to $605 in 2019, then rose to $1,086 in 2022. Drivers include El Nino droughts, which cut yields with a long lag, crude oil prices through biodiesel demand, and soybean oil prices. Output follows a seasonal cycle, rising in the second half of the year. Supply response is slow because new trees take years to bear fruit.

Palm oil price

Chart: Palm oil monthly price

Chart: Palm oil annual real price

Super-cycles in palm oil

Palm oil moves with the vegetable oil complex and with crude oil, and it shares the big commodity booms of the 1970s, 2007-08, 2010-11 and 2021-22. The World Bank price rose from about $233/t in 1960 to a record $1,777/t in March 2022, but in real 2010 dollars the annual average fell from $1,075/t in 2011 to $867/t in 2025. Supply is slow to respond because trees take three years to bear, so shortages can last two to three years. Over the long run, rapid planting in Indonesia and Malaysia kept prices in check. Since 2015, Indonesia's biodiesel mandates have tied palm demand to energy policy, and slower area growth now makes supply tighter.

1. 1973-1974

   The general commodity boom, the oil shock and a shortage of oilseed protein and oils lifted all vegetable oils.

   World Bank monthly average from $185/t (Feb 1972) to $840/t (Oct 1974)

2. 2006-2008

   Biofuel demand, high crude prices and Chinese and Indian import growth drove the first big modern boom; the financial crisis crashed it.

   monthly average $459/t (Jan 2006) to $1,377/t (Mar 2008), then $581/t (Nov 2008)

3. 2010-2011

   La Nina weather and strong Asian demand pushed oils up again, followed by a long slide as Indonesian plantings matured.

   monthly average $1,327/t (Feb 2011), then down to $535/t (Dec 2018)

4. 2020-2022

   Covid labour shortages in Malaysia, Indonesian biodiesel expansion, the war in Ukraine (sunflower oil) and Indonesia's export ban from 28 April to 23 May 2022 created the sharpest spike on record.

   record monthly average $1,777/t (Mar 2022), then $804/t (Oct 2023)

5. 2024-2026

   Indonesia's B40 mandate, seizure of plantations by the forest task force and weak yields from ageing trees kept prices firm; GAPKI warns a strong El Nino could cut output by up to 5 Mt.

   monthly averages: $845/t (Jan 2024), $1,190/t (Dec 2024), $908/t (May 2025), $1,180/t (Sep 2026)

What drives the cycle

• Indonesian biodiesel policy. B40 already absorbs 12.7 Mt a year (2025); B50 could take 16.3-17 Mt, removing export supply. Mandates are funded by an export levy that moves with prices.
• Weather, especially El Nino. Drought cuts yields with a lag of 6-24 months, because bunch formation is set long before harvest.
• Ageing trees and slow replanting. Old palms yield less; replanting cuts output for three years. Indonesia's PSR programme is behind schedule.
• Price gap to soybean and sunflower oil. India and other price-sensitive buyers switch oils quickly when palm's discount narrows; in November 2025 palm averaged $983/t against $1,128/t for soybean oil, a $145/t gap (World Bank monthly averages).
• Import policy in India. Duty changes in India shift demand between crude and refined palm, and between palm and soft oils.
• Crude oil prices. Higher diesel prices raise the value of palm as biodiesel feedstock and the cost of the levy-funded subsidy.

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