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The drought linked to El Niño and the rise in fertilizers put Indonesia’s palm oil under pressure in 2026, threaten small producers, and raise an alert in one of the world’s most strategic agricultural markets.
The drought forecast for 2026 in Indonesia already raises an important alert about the country’s palm oil production. According to industry representatives, the drier climate related to El Niño, combined with the surge in fertilizer prices, could cause a drop of 1 million to 2 million tons in production compared to 2025.
The warning comes from leaders in the palm oil sector at a sensitive time for the world’s largest producer of the commodity. The scenario draws attention because it mixes two factors of strong impact at the same time: a longer and more severe dry season and a significant increase in production costs, especially for smallholders, who account for 37% of the plantation areas in the country.
What is behind the drought alert in Indonesia
The main concern is the possibility of a more prolonged and intense dry season in 2026. Indonesia’s meteorological agency has warned that the country is expected to face a more severe drought period than last year, increasing the risk for agricultural production.
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In the case of palm oil, the fear is that the drought linked to El Niño will reduce crop yields precisely in a sector that was experiencing growth. The expectation presented by industry representatives is that production will decline significantly if the climate scenario is confirmed and fertilizer use remains pressured.
The numbers that explain the size of the threat
The most concerning estimate put forward by the sector points to a drop of 1 million to 2 million tons in palm oil production in 2026, compared to 2025. The potential impact is significant because Indonesia produced 51.66 million tons of crude palm oil in 2025.
This volume represented a growth of 7.3% on an annual basis, showing that the sector was on a positive trajectory. Therefore, the combination of drought and higher input costs gains even more weight, as it threatens to interrupt this pace in a market of enormous relevance to the country.
Why fertilizers have become a central problem
Besides the climate, the sector is also facing an increase in fertilizer costs. According to GAPKI president Eddy Martono, the prices of these inputs have risen 30% since the start of the war in the Middle East. This price increase changes the production cost equation and directly affects producers’ investment capacity.
The situation could be even more severe among smallholders. With higher costs, the risk of reducing or delaying fertilizer application increases, which could exacerbate the effects of the drought and further compromise crop performance throughout the year.
What changes for small palm oil producers
Small producers are at the center of this pressure because they represent 37% of the plantation areas in the palm oil sector in Indonesia. This means that any difficulties faced by this group have the potential to broadly impact the country’s total production.
The fear expressed by sector leaders is that many of these producers will stop applying fertilizers due to the cost increase. In practice, this could increase the vulnerability of plantations during a more severe drought, reducing productivity and increasing pressure on the sector’s final results in 2026.
How the sector is trying to react to the increase in costs
Faced with rising prices, some producers have already started looking for alternatives to reduce expenses. According to Setiyono, president of the palm oil producers group ASPEKPIR, some fertilizers have increased by more than 50%.
Because of this, group members started using organic fertilizers as a way to contain costs. This change shows that the sector is trying to adapt quickly, but it also reveals the extent of financial pressure at a time when **drought** threatens production and reduces the margin for error in crop management.
Why this scenario is attracting so much attention in the agricultural market
Indonesia is the world’s largest producer of palm oil, which makes any sign of production loss particularly relevant. When a country with such weight faces climate risk and rising costs simultaneously, the market pays close attention, because the impact can extend beyond the fields and affect the entire product chain.
The alert for 2026 gains strength precisely because it is not just an isolated climatic issue. The **drought** associated with El Niño appears alongside an escalation in fertilizer prices, creating double pressure on production and increasing concern for small-scale producers.
What could happen in the coming months
The coming months should be decisive in measuring the true extent of the potential loss. If El Niño strongly confirms and fertilizer use remains compromised, production could suffer the decline estimated by the sector.
At the same time, the reaction of producers to rising costs will be an important factor. The behavior of smallholders, especially regarding the use or postponement of fertilizers, should help determine whether the **drought** will result in a more moderate retraction or a more intense loss in Indonesia’s palm oil production in 2026.
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