El Niño risks cutting Malaysia’s palm oil and rice output

SELANGOR, JOHOR, MALAYSIA, 8 OCTOBER 2026 —

El Niño conditions will reduce Malaysia’s palm oil and rice production, with University of Putra Malaysia (UPM) experts warning of lower yields if drought persists. The university’s agricultural faculty recommends linking farmer incentives to actual output rather than one-off cash payments to boost productivity.

UPM’s proposal follows observations of declining water reserves in key growing regions, though no official government figures on expected yield losses have been released. The warning comes as Selangor, Penang, and Johor face prolonged dry spells, with state agricultural departments assessing irrigation needs.

The impact on Malaysia’s top export—palm oil—could tighten global supply chains already strained by Indonesia’s export restrictions. Rice shortages may push domestic prices higher, testing government subsidy buffers. Plantation stocks like Sime Darby Plantation Bhd and Felda Global Ventures Holdings Bhd will face earnings pressure if yields fall below forecasts.

The Meteorological Department’s November drought assessment will be critical in determining the extent of damage. No large-scale water rationing has been announced, but state-level drought alerts remain active. Bank Negara Malaysia has urged banks to expedite agricultural loan approvals, though uptake has been slow due to uncertainty over harvest sizes.