Palm oil and fertiliser shock

Palm oil exports from Malaysia and Indonesia have jumped as the Iran war scrambles fuel markets and buyers reach for alternative vegetable oils. (asia.nikkei.com) Malaysia’s palm oil exports rose 40.7% in March from February to 1.55 million tonnes, while end-March stocks fell 16.14% to 2.27 million tonnes, according to Malaysian Palm Oil Board data reported on April 10. Indonesia exported 4.54 million tonnes of crude and refined palm oil in January-February, up 36.3% from a year earlier, according to Statistics Indonesia data cited by Reuters. (prestasisawit.mpob.gov.my) (ukragroconsult.com) The fertiliser side of the shock is moving through shipping lanes rather than plantations. Splash247 reported on April 20 that about 24% of global bulk fertiliser supply is effectively shut in behind the Strait of Hormuz after vessel transits through the waterway dropped by more than 95%. (splash247.com) That blockage matters because urea is the main nitrogen fertiliser used to push crop yields higher, and the Gulf is a major export hub for it. Splash247, citing AXSMarine and Jefferies, said about 833,800 metric tonnes of fertiliser is stranded in the Gulf and that lost Gulf nitrogen exports account for roughly 30% of global urea supply. (splash247.com) Southeast Asia is exposed to both sides of that squeeze at once. Malaysia and Indonesia gain when crude palm oil prices rise, but growers and food producers also face higher fertiliser, freight and insurance bills as they move into new planting and processing cycles. (asia.nikkei.com) (splash247.com) The supply picture is not loose enough to absorb a long disruption easily. The United States Department of Agriculture said on April 15 that Indonesia’s 2026-27 palm oil production is forecast at 48 million metric tons, up 3% from 46.7 million, but warned that an early dry season and below-normal rainfall could curb yields in several producing regions. (fas.usda.gov) Malaysia is also trying to divert more palm oil into fuel at home. The Malaysian Palm Oil Council reported on April 16 that the country’s biodiesel push could add more than 300,000 metric tons of annual palm oil demand, tightening the balance further if exports stay strong. (mpoc.org.my) Not everyone in the trade sees a pure volume shortage yet. Filipe Gonzaga, managing director of trader Bryce, told Splash247 that “the physical product has not disappeared” but that war-risk insurance and spot freight have made moving it “near-prohibitive.” (splash247.com) The immediate result is a split market: upstream producers of palm oil can benefit from firmer prices, while downstream farmers and food manufacturers pay more for the nutrients and shipping needed to keep crops moving. If the Hormuz disruption and dry weather persist into mid-2026, the pressure is likely to show up first in planting decisions and later in harvests. (asia.nikkei.com) (fas.usda.gov) (splash247.com)