As FMCG giants ITC, Britannia, Nestlé India and PepsiCo India, alongside snack makers Haldiram’s and Bikaji Foods, prepare for Diwali demand, a potential palm oil supply squeeze in Indonesia is casting a shadow over their 2027 input costs. Major edible oil businesses, including AWL Agri Business, Patanjali Foods, Bunge and ADM Agro Industries, face a related procurement challenge as the world’s largest palm oil producer warns of a possible 4–5 million-tonne production decline next year.
Dr. Mohamad Fadhil Hasan of the Indonesian Palm Oil Association (GAPKI) projected a decline if El Niño-related weather disruptions materialise, following broadly stable output in 2026. Indonesia’s domestic consumption could increase by another 2 million tonne if its B50 biodiesel blending programme is fully implemented, potentially squeezing exports and pushing average palm oil prices above 2026 levels.
Yet Dorab Mistry, Director of Godrej International, cautioned against expectations of a runaway price rally. “The outlook for 2027 is bullish, but not super bullish,” he said at the recent GLOBOIL India 2026 conference in Mumbai, arguing that elevated prices could weaken consumption while a strong US dollar might restrain commodity markets.
Sanjeev Asthana, Chief Executive Officer of Patanjali Foods, told businessline that higher edible oil prices remained a concern because of their potential impact on FMCG companies’ margins. Patanjali, however, has a dedicated team monitoring oil procurement and price risks, leaving the company relatively protected, he said. Nevertheless, the broader outlook remains worrying and requires close monitoring.
The contrasting assessments leave Indian manufacturers with a difficult choice: secure supplies ahead of a possible shortage or wait for weaker demand to restrain prices.
Palm oil and its derivatives are used extensively in frying, biscuits, confectionery, bakery products and packaged snacks. Higher international prices could squeeze manufacturers’ margins, depending on sourcing contracts, product formulations and their ability to pass costs on to consumers.
AWL Agri Business and Patanjali Foods were among the prominent businesses associated with GLOBOIL, alongside Bunge and ADM. Their exposure to international oil markets illustrates how changes in Indonesian production can ripple through India’s refining and food-processing supply chains.
The projected shortage concerns 2027, not the current festive season. But procurement decisions made in the coming months could influence the prices companies pay for future supplies.
Mistry also welcomed India’s reduction in import duties on crude and refined edible oils while preserving domestic refining margins.
Indonesia’s evolving trade relationship with the European Union adds another uncertainty. GAPKI outlined an initial annual preferential quota of 1.9 million tonne of Indonesian crude and processed palm oil for Europe, increasing 3 per cent annually for nine years, subject to implementation and sustainability requirements.
The arrangement could strengthen European buyers’ access to Indonesian supplies, although any resulting diversion from India remains uncertain.
The Council of Palm Oil Producing Countries (CPOPC) has called for closer cooperation with India as producing nations balance edible oil exports against domestic energy requirements.
“India is much more than an export destination for palm oil producing countries,” CPOPC Secretary-General Izzana Salleh said, emphasising food security and resilient supply chains.
CPOPC Deputy Secretary-General Dr. Musdhalifah Machmud said food and energy security were both legitimate objectives, but changing biofuel policies required transparency to help Indian buyers plan ahead.
The council said its members’ combined palm oil production rose from approximately 66 million tonne in 2021 to 73 million tonne in 2025. Future supply growth will depend on replanting, improved yields and smallholder productivity.
A CPOPC representative said Indian buyers were exploring alternative vegetable oils and negotiating 2027 contracts amid price uncertainty.
For India’s food companies, the immediate task is meeting festive demand. The bigger calculation is whether to lock in next year’s supplies before Indonesia’s production risks materialise or wait for weaker global consumption to temper the anticipated price increase.
Published on October 12, 2026
