Jakarta. The World Bank expects palm oil prices to post moderate gains in 2026, supported by rising biofuel demand amid higher energy prices, while overall food markets remain broadly stable.

In its latest Commodity Markets Outlook, the World Bank projects prices for vegetable oils, including palm oil, to increase by about 8% this year, with palm oil prices forecast to rise to around $1,089 per metric ton in 2026 from $1,007 in 2025, before largely stabilizing in 2027.

The increase is driven by stronger demand for biofuel feedstocks as elevated oil prices push countries to seek alternative energy sources.

“Rising energy costs are boosting demand for biofuel products such as palm oil and soybean oil,” the report noted.

However, supply conditions are expected to limit further price gains.

The World Bank said “export supplies of edible oils are expected to be constrained in 2026 by higher domestic use of soybean oil and palm oil for biodiesel in major exporting countries,” reflecting shifts driven by energy market disruptions.

It added that “continued growth in edible oil production and comfortable stock-to-use ratios are likely to curb price increases.”

The broader food price outlook remains contained, with global food prices projected to rise by only around 2% in 2026 amid ample supply conditions.

For Indonesia, the world’s largest palm oil producer, the outlook points to steady export demand rather than a sharp price rally, even as biofuel consumption increases globally.

Industry data also point to a gradual recovery in output. According to the Indonesian Palm Oil Association (GAPKI), Indonesia’s palm oil production is expected to return to growth after declining in 2024. Production is estimated at around 52.7 million tons (crude palm oil and palm kernel oil) in 2024, down from about 54–55 million tons in 2023.

Output is projected to increase by about 10% to around 56–57 million tons in 2025, followed by further growth of about 4–5% in 2026, driven mainly by improved productivity and maturing plantations rather than new land expansion.

At the same time, rising input costs are expected to pressure the sector.

The World Bank said “fertilizer affordability is expected to deteriorate this year to the worst levels since 2022, pressuring farming profit margins.”

More broadly, the World Bank said “the rise in energy prices this year is set to slow growth in emerging market and developing economies (EMDEs) and drive their average inflation rate to a four-year high.”