Lang
KUALA LUMPUR (Aug 11): Analysts anticipate a price hike for Crude Palm Oil (CPO) in the second half of 2026, as escalating supply risks are expected to provide an upside to plantation stocks.
Driven by rising geopolitical risks and a strengthening El Niño phenomenon, analysts foresee CPO prices trading above RM4,000 per tonne for the remainder of 2026.
CIMB Securities stated in a note on Tuesday: 'We expect CPO prices to trade within RM4,400–RM4,600/tonne in the near term, supported by rising geopolitical risks, strengthening El Niño conditions, and higher biodiesel demand in Indonesia.'
CIMB further reported that disruptions to sunflower oil exports due to cargo strikes involving Russia and Ukraine could stimulate substitution demand for palm oil. This, coupled with India’s approaching festival season, which significantly increases cooking oil consumption, is expected to provide additional upward momentum.
Conversely, the research house highlighted that more intense El Niño conditions, commencing in October, could further diminish oil palm yields and production in Southeast Asia. While this poses greater downside risks to supply, the impact is largely projected from 2027 onwards due to inherent 'time lags' in production cycles.
'Given stronger El Niño conditions and geopolitical risks, we raise our 2026 and 2027 CPO price forecasts by RM50/tonne to RM4,450/tonne and RM4,550/tonne, respectively,' CIMB added.
Separately, Indonesia’s B50 biodiesel mandate is set to bolster global CPO demand. This comes as the US Department of Agriculture (USDA) cut its Indonesian palm oil production forecast for 2026-2027 to 47.2 million tonnes, citing drought expectations from October onwards.
Public Investment Bank, which projects an average CPO price of RM4,400 per tonne for 2026-2027, noted: 'Indonesian palm oil stocks are projected to shrink 28% year-on-year to 3.1 million tonnes.'
However, concerns have grown regarding high inventory levels potentially capping further price upsides, according to TA Securities.
This sentiment emerged after Malaysia’s CPO stockpiles surpassed market expectations, reaching a high of 2.63 million tonnes in July.
TA Securities, which maintained its 2026 CPO price assumption of RM4,300 per tonne, explained: 'The inventory build was mainly due to higher production and lower domestic usage, which more than offset the improvement in exports.'
It further detailed that, 'On a year over year basis, stockpiles were 24.3% higher, while exports grew 4.8%. Production, domestic usage and imports declined by 1.1%, 19.5% and 6.9%, respectively.'
For investment strategy, analysts identified IOI Corporation Bhd (KL: IOICORP), Kuala Lumpur Kepong Bhd (KL: KLK), Hap Seng Plantations Holdings Bhd (KL: HSPLANT), and SD Guthrie Bhd (KL: SDG) as their top picks. Source: KLSE Screener