Policy uncertainty the biggest worry for MPOA in 2026

BY ROSLIN AZMY HASSAN Chief executive of the Malaysian Palm Oil Association (MPOA)

The Edge: After a year marked by uncertainty from tariffs and geopolitics, what are your expectations for 2026?

MPOA: Despite a tough external environment this year, we are heading into 2026 with cautious optimism. Most analysts at the MPOB International Palm Oil Congress and Exhibition (PIPOC) 2025, including CIMB, Fastmarkets and Glenauk, expect CPO prices to stay fairly stable next year, trading at RM4,000 to RM4,600 per tonne.

Dr Julian McGill of Glenauk Economics sees prices recovering to between RM4,300 and RM4,400 by the first quarter of 2026. Dr Sathia Varqa of Fastmarkets expects RM4,500 to RM4,600 on seasonal recovery.

A few positive factors going into 2026:

• Global production growth is expected to be flat, held back by La Niña, ageing trees and high input costs, especially in Indonesia;
• Palm oil is regaining price competitiveness against soybean oil;
• Export demand tends to rebound quickly when palm becomes cheaper; and
• Indonesia’s biodiesel programme, even with uncertainties, continues to support demand structurally.

On the regulatory front, the European Union’s decision to delay and simplify the EU Regulation on Deforestation-free Products (EUDR) requirements removes the Jan 1 compliance shock many had feared. This gives everyone more breathing room.

Overall, we expect a more balanced year, with firmer prices and better clarity on global policies.

What downside risks or competitive threats worry you most for 2026?

There are several:

1. Policy uncertainty – the biggest factor

• Indonesia’s B40/B50 rollout is still unclear, given insufficient capacity and funding;
• US-China trade tensions continue to influence soybean flows and vegetable oil prices; and
• The EUDR, while delayed, still carries operational challenges.

2. Weather risks

• La Niña may create uneven yields across the region.

3. Indonesia’s structural issues

• Land seizures, reclassification issues and slow replanting could put three million to 3.5 million tonnes of Indonesian supply at risk, which can cause volatility.

4. Competition from soy and canola

• China’s massive soybean crushing has made the country a soybean oil exporter, shifting global dynamics; and
• Any US restrictions on Canadian canola could flood global markets with displaced supply.

5. Malaysia’s replanting backlog

• Our replanting rate is only 1.5% versus the required 4%, with 650,000ha of old palms. This depresses yields and competitiveness. So, while demand is stable, supply, policy and weather remain key watchpoints for 2026.

What role will AI and automation play in planters’ operations? What is challenging about adopting AI and automation?

AI and mechanisation are increasingly part of plantation operations. We are seeing:

• Drone-based crop monitoring;
• Digital estate systems;
• Precision agriculture tools;
• Early mechanised harvesting solutions; and
• Smallholder digitalisation through FELDA’s Smart Plantation Management Solutions (SPMS), RISE and e-Nota.

These tools improve efficiency and decision-making and, importantly, reduce dependence on manual labour.

The challenges:

• Terrain and crop height make tech adaptation difficult;
• High upfront cost;
• Skills gap, where we need more trained operators and technicians; and
• Field execution is often the limiting factor, not technology.

As one speaker at the MPOB PIPOC 2025 said: “The turnaround is an operational discipline, not a technology problem.”

Do you face challenges in hiring the right people? Are there plans to reduce reliance on foreign labour?

Yes, labour remains one of the biggest constraints, especially for harvesting. Even with improved recruitment flow, the sector is still heavily reliant on foreign labour.

This is why mechanisation and automation are critical. Growers are actively adopting:

• Mechanised collection tools;
• Assisted harvesting devices;
• AI and digital monitoring systems; and
• Drones for surveillance and fertiliser application.

Over time, these methods will reduce dependency on manual labour. In the meantime, we are also trying to attract more locals into technical and supervisory roles as estates digitalise.

If you could ask the government for one thing, what would it be?

A consistent long-term policy framework is essential, especially on labour, sustainability and mechanisation.

But if we could ask for one specific thing, it would be for the Windfall Profit Levy (WPL) to be channelled back to the industry as replanting support.

Malaysia urgently needs to ramp up replanting to between 200,000ha and 228,000 ha per year to clear the backlog of old trees. Replanting costs typically range from RM18,000 to RM25,000 per hectare, which remains prohibitive, particularly for mid-sized estates.

Incentives sought include:

• Direct replanting grants covering 50% of land clearing, planting materials and early maintenance costs;
• Soft loans or zero-interest financing with moratoriums during the three- to four-year immature phase for small and medium companies;
• Tax deductions or accelerated capital allowances for replanting and mechanisation investments;
• Labour-saving mechanisation support, including grants for harvesting, in-field transport and automation technologies; and
• Funding support for EUDR and MSPO (Malaysian Sustainable Palm Oil) compliance, including traceability systems, digital land mapping and sustainability certification costs.

These measures would:

• Raise yields through younger, higher-yielding palms.
• Reduce labour dependency via modern planting layouts and mechanisation.
• Strengthen Malaysia’s long-term competitiveness as an efficient palm oil producer.
• Improve EUDR and MSPO compliance, especially among smallholders.

Currently, smallholders receive replanting grants totalling about RM100 million per year through the Malaysian Palm Oil Board. However, this allocation covers only a fraction of the national requirement and does not adequately address the widening backlog of old palms, particularly in the estate sector. Using Windfall Profit Levy (WPL) funds for replanting would ensure that windfall revenues are reinvested into productivity and structural reform rather than short-term consumption.

A few other notable updates

• EUDR Delay: The EUDR has been delayed to end-2026/27 with simplified requirements. This avoids a major operational shock;
• Indonesia’s B50 Programme: Indonesia’s B50 programme begins road testing this month with early rollout likely restricted to the public sector;
• Indonesia Replanting: Indonesia’s replanting programme is far behind target, with only 23,000ha achieved this year, raising long-term supply questions;
• Production Trends: Indonesia produced around 43 million tonnes in the first nine months (up 11% year on year), but future growth will be constrained;
• Malaysia’s Position: Malaysia needs bold replanting action or we risk falling further behind our competitors; and
• Digital Transformation: The digital transformation of smallholder models such as FELDA is showing promising results in productivity and governance.

All this reinforces our conviction that 2026 will be shaped by policy clarity, replanting discipline and smart adoption of technology.

MPOA members comprise individuals and corporate bodies involved in plantation tree crop agriculture, with at least 40ha.

Source : The Edge 12 January 2026