El Niño Sparks Wildfires in Indonesia, Palm Oil Futures Approach December Highs

(1) Malaysian palm oil futures prices have risen to 4,970 ringgit/ton, approaching the highs seen since December 2024. The market is mainly assessing the supply disruption risks brought about by large-scale forest fires in Indonesia. (2) The fires have created thick smog blanketing many parts of Southeast Asia, with some agricultural workers diverted to firefighting efforts, disrupting palm oil harvesting operations. Smoke and insufficient sunlight might also restrict the growth of palm fruit. (3) This round of fires has been intensified by an unusually strong El Niño phenomenon. Drought conditions have increased fire risks, and cross-border haze continues to spread. The combined burned area in Kalimantan and Sumatra exceeds 202,000 hectares, and countries including Indonesia, Singapore, Malaysia, and the Philippines are experiencing increased pollution levels. (4) The market expects rainfall to rise around October, and the onset of the rainy season may help curb the development of the fires. (5) The strengthening prices of crude oil and other vegetable oils are also providing support for palm oil prices.