Fuel Costs and Shortages Disrupt Palm Harvests in Southeast Asia
Rising diesel prices and shortages in Malaysia and Indonesia are forcing palm oil smallholders to reduce harvest rounds, threatening yields.
Palm oil harvests across Southeast Asia's key producing regions are facing significant disruption as smallholders grapple with soaring fuel costs and supply shortages. Farmers in the Malaysian states of Sabah and Sarawak on Borneo, as well as those on Indonesia's Sumatra island, are being forced to reduce the frequency of their fruit collection rounds, a move that threatens to curb output of the world's most widely used edible oil.
The impact is most acute in Sabah and Sarawak, where unsubsidised diesel prices have surged by nearly 120%. These two states are critical to global supplies, accounting for 43.9% of Malaysia's crude palm oil output, which totalled 20.28 million metric tons in 2025. Sumatra, meanwhile, contributes 55% of Indonesia's palm oil production.
Industry officials point to the rugged terrain of Borneo's sprawling plantations as a key challenge. The remote locations make it difficult and fuel-intensive for farmers to transport fresh fruit bunches to collection points or mills. While Malaysia offers subsidised diesel at 2.10 ringgit per litre, the monthly cap of 200 litres falls far short of the average operational need of at least 500 litres for farmers in these regions.
"Financial constraints will make it unviable for smallholders to harvest crops, leading to abandoned fields and a direct decline in state palm oil productivity," said Napolean R Ningkos of the Sarawak Dayak Oil Palm Planters Association. He noted that farmers have already reduced their harvesting rounds from roughly 2.5 times a month to just 1.5 times, or even once, adding that the current subsidy quotas are designed for the relatively flat lands of West Malaysia and are inadequate for the rugged interior of Sabah and Sarawak.
The financial burden extends beyond transport. Raphael Golout, president of the United Sabah Smallholders Association, highlighted increased expenses for power generators and other machinery. Both officials have called for a revision of the diesel subsidy policy to better reflect the geographical and economic challenges faced by farmers. The harvesting delays could reduce Sarawak's yields by 15% to 20%, according to Napolean.
In Indonesia, farmers on Sumatra have been curtailed by tight diesel supplies since mid-July. Gulat Manurung, chairman of smallholders' group APKASINDO, said the shortage affected fruit bunch transportation as all vehicles and equipment rely on diesel engines. The problem has led to longer harvesting intervals of eight to 12 days, up from the usual eight to 10 days.
These disruptions come at a precarious time. Global fuel prices have risen and supplies have tightened since the U.S.-Israel war on Iran broke out in late February. Additionally, the prospect of an El Nino weather pattern in the latter half of the year threatens to cut rainfall and dent yields further. Severe El Nino conditions in 2015 and 2016 cut palm oil output in Malaysia by up to 18% and in Indonesia by 3%. Malaysian benchmark palm futures have already risen more than 15% this year.