A strong El Niño expected to affect Malaysia and Indonesia later this year could disrupt palm oil production in the Philippines’ top suppliers of the commodity, potentially leading to supply shortages for local manufacturers, according to a new advisory from the Department of Foreign Affairs (DFA).
The advisory, dated July 8, 2026 and addressed to the Philippine Exporters Confederation Inc. (PHILEXPORT), cited a report from the Philippine Embassy in Kuala Lumpur referring to meteorological forecasts showing “a growing likelihood of a strong El Niño affecting Malaysia and Indonesia between November 2026 and January 2027.”
The DFA warned that an El Niño-induced decline in Malaysia’s palm oil production “could have implications for Philippine food security, inflation, and import dependence.”
The advisory added that dry conditions could begin as early as July 2026, “significantly disrupting palm oil production which is highly vulnerable to drought.”
Previous strong El Niño episodes in 1997-1998 and 2015-2016 reduced crude palm oil (CPO) production in Malaysia and Indonesia by about 13%, the advisory said.
“This time around, rising fertilizer costs linked to geopolitical developments in the Middle East may further constrain supply yields,” the advisory, addressed to PHILEXPORT President Sergio R. Ortiz-Luis Jr., said.
The DFA noted that around 98 percent of the palm oil used in food manufacturing, cooking oil, and other consumer goods in the Philippines is imported from Indonesia and Malaysia.
“Any tightening of global supply and increases in CPO prices could lead to higher domestic prices of vegetable oils and related food products,” it said.
While the impact of El Niño on palm oil production typically becomes evident six to 12 months after dry conditions begin, prices could start rising well before actual supply shortages emerge, the DFA added.
Data from the Observatory of Economic Complexity showed that the Philippines imported USD1.48 billion worth of palm oil in 2025. Malaysia supplied USD746M, while Indonesia accounted for USD735M. Smaller volumes came from Singapore, Italy, and Vietnam.
Domestic palm oil production, which is concentrated mainly in Mindanao, remains insufficient to meet local demand. In February, the Department of Agriculture said it plans to seek additional funding to expand palm oil plantations in Mindanao as part of efforts to reduce import dependence, raise farmers’ incomes, and increase the country’s edible oil supply.
