Palm oil producers in Malaysia are scaling back replanting due to rising fertiliser and fuel costs amid elevated vegetable oil prices, The Edge Malaysia wrote.
Planters in the world’s second largest palm oil producer were facing fertiliser price increases of up to 60%, while diesel costs had more than doubled since the start of the US-Iraq Iran war, according to farmers, industry officials and analysts quoted in the 19 May report.
With the near-closure of the Strait of Hormuz holding back global energy supplies, benchmark prices of crude palm oil (CPO) had risen by about a tenth since late February, prompting farmers to produce rather than replant, The Edge Malaysia wrote.
Ageing oil palm plantations in Malaysia and top global producer Indonesia were a key concern for supply, with the industry only beginning to step up long-delayed replanting efforts in 2025, according to the report.
However, Indonesia – unlike Malaysia – had ample domestic supplies of fertiliser, the report said.
Replanting was critical to maintaining yields at a time when supplies were pressured by stagnating output and Indonesia diverted more of its production to biodiesel, The Edge Malaysia wrote.
Smallholder farmers, who comprise 40% of Malaysian output, were also scaling back replanting for lack of financial support, industry officials said.
In the Malaysian state of Sarawak on Borneo island, many smallholders cultivated land under Native Customary Rights, which did not confer formal ownership, said Napoleon Ningkos, president of the Sarawak Dayak Oil Palm Planters Association.
“If they don't replant, we will definitely see yields keep going down and this will affect volumes in coming years.”
Fertiliser comprised about half the costs of palm oil production costs, The Edge Malaysia wrote.
According to companies quoted in the report, the impact to date appears largely confined to smallholders, with major producers operating without significant disruption.
Despite this, maintaining a healthy replanting rate of 3%-4% in Malaysia this year could be challenging, due to current uncertainties, Roslin Azmy Hassan, chief executive of the Malaysian Palm Oil Association (MPOA) said.
Malaysia’s replanting rate rose to 3.4% in 2025, higher than the annual 2% rate over the previous five years, driven by accelerated replanting efforts by larger plantations and government support for smallholders, The Edge Malaysia wrote.
In addition to facing rising fertiliser and fuel costs, Malaysia’s agri-commodity sector was facing a severe cost squeeze on other fronts, with shipping costs to the Middle East surging between 50%-80% and war risk insurance premiums rising to as much as 3%, Economy Minister Akmal Nasrullah Mohd Nasir was quoted as saying in a 25 May New Straits Times (NST) report.
Upstream plantation and machinery costs had risen by 10%-30%, Nasir added.
Manufacturing costs were also under strain, with palm oleochemical production costs rising by up to 30%, NST wrote.
To protect smallholder incomes, Nasir said the government had implemented a series of mitigation measures through the Plantation and Commodities Ministry. Measures included monitoring plantation operating costs to optimise production expenses and channelling targeted cash assistance to smallholders through the Budi Agri-Komoditi scheme to ease the input cost burden.
The government was also coordinating bulk purchases of fertiliser and pesticides through central agencies to secure lower prices for farmers and providing logistics assistance through rebates on export levies and duties for returned cargo to reduce losses for operators, NST wrote.
