AEP Plantations expects palm oil prices to remain supported in the fourth quarter of 2026, citing food demand, firm energy markets and Indonesia’s planned B50 biodiesel rollout, while warning that potential El Niño conditions could constrain production in 2027.
The palm oil producer, which operates plantations in Indonesia and Malaysia, reported a 13.3% increase in production to 924,000 tonnes for the nine months ended 30 September 2026. Stronger output in Kalimantan and contributions from recently acquired PT AEP Pinago Plantations in South Sumatra supported the increase.
The company’s outlook comes as palm oil markets respond to both food-sector demand and its role as a feedstock for biodiesel. Indonesia’s move towards a higher biodiesel blending mandate is expected to increase domestic palm oil consumption, potentially tightening the supply available to other buyers.
AEP also highlighted operational developments across its plantation estate, including replanting, new planting and construction of its ninth palm oil mill in Kalimantan.
B50 biodiesel rollout expected to support domestic demand
AEP Plantations expects Indonesia’s B50 biodiesel rollout to strengthen domestic palm oil consumption and contribute to price support in the final quarter of 2026.
B50 refers to a biodiesel blend containing 50% biodiesel and 50% conventional diesel by volume. In Indonesia, palm oil-derived biodiesel is an important component of the country’s strategy to reduce reliance on fossil fuel imports and support domestic demand for crude palm oil (CPO).
Higher biodiesel blending requirements can increase the volume of palm oil-based feedstock absorbed by the domestic energy market. The effect on CPO prices, however, depends on factors including implementation timelines, actual biodiesel consumption, palm oil production, inventories and demand from food and other industrial users.
AEP also cited food demand and firm energy markets as factors underpinning its price outlook. These drivers could support prices, although the company’s assessment remains a forecast rather than a guarantee of market performance.
Production rises 13.3% in nine months
AEP Plantations produced 924,000 tonnes during the nine months to 30 September 2026, representing a 13.3% increase compared with the corresponding period.
The company attributed the growth to stronger production in Kalimantan and output from PT AEP Pinago Plantations in South Sumatra, which it recently acquired.
The increase in production provides a measure of the group’s operating performance during the period. Its future output will also depend on plantation maturity, fresh fruit bunch yields, weather conditions and the development of its existing and newly planted areas.
Replanting programme targets long-term productivity
The group replanted 1,785 hectares and completed more than 430 hectares of new planting during the reporting period.
AEP said it remained on track to meet its five-year target of replanting approximately 10,000 hectares. Replanting is an important part of plantation management because older palms can become less productive, while newly planted areas take time to mature and contribute meaningfully to harvest volumes.
The programme is intended to support long-term productivity and yield growth. However, replanting can temporarily affect output because land is taken out of its previous production cycle before replacement palms reach productive maturity.
The balance between current yields and future plantation renewal will therefore remain relevant to the group’s production trajectory.
Ninth palm oil mill nears completion in Kalimantan
Construction of AEP Plantations’ ninth palm oil mill at KAP Estate in Kalimantan is nearing completion, with commissioning targeted for early January 2027.
Building and structural works were 98% complete at the end of September, and all machinery had been delivered to the site by early October.
The mill is an additional processing asset within the group’s plantation operations. Its commissioning will be a key milestone, although the source information does not specify its processing capacity or the expected effect on the company’s total milling capacity.
Palm oil mills process harvested fresh fruit bunches to extract crude palm oil and palm kernels. Adequate processing capacity can help plantations handle harvested fruit promptly, making mill availability and operating efficiency important to the broader production chain.
JJU Estate rehabilitation to proceed in phases
Rehabilitation work at JJU Estate is progressing, with development and new planting expected to take place in phases as the required approvals are obtained.
AEP expects the project to take between three and five years to complete. The phased approach means that the estate’s development will extend beyond the current reporting period, with progress dependent in part on securing approvals.
The company has not provided further details on the total area involved or the anticipated production contribution from the rehabilitation programme.
El Niño could weigh on 2027 yields
Despite the increase in output during the first nine months of 2026, AEP warned of a potential reduction in fresh fruit bunch yields in 2027 if El Niño conditions and prolonged dry weather affect its plantations.
Oil palm productivity is sensitive to weather patterns. Extended dry periods can affect palm development and fruit production, with impacts potentially emerging over time rather than immediately during the period of reduced rainfall.
AEP reported no material fire-related disruption to its operations during the period. Nevertheless, the company said weather-related production losses could tighten crude palm oil supply and provide additional support for prices.
The potential impact remains uncertain and will depend on the severity, duration and geographical distribution of dry conditions, as well as their effects on yields across major producing regions.
Bioenergy Business Analysis
AEP Plantations’ outlook illustrates the close relationship between Indonesia’s biodiesel policy and the wider palm oil market. If B50 implementation increases domestic feedstock consumption, it could change the balance between biodiesel demand, food-sector requirements and export availability. The eventual price effect will depend on actual implementation and consumption, alongside production, stocks and international demand.
The company’s production growth, plantation renewal programme and planned mill commissioning point to continued investment in its operating base. However, the possibility of lower fresh fruit bunch yields in 2027 highlights the vulnerability of palm oil supply to prolonged dry weather and El Niño-related conditions.
