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Crude palm oil (CPO) prices are projected to remain under pressure due to substantial inventory levels and seasonal production cycles, though the onset of El Niño is expected to provide price support by 2027, according to leading research houses. Hong Leong Investment Bank (HLIB) noted that elevated stockpiles are likely to persist through October 2026 as production nears its seasonal peak, a factor that could weigh on market valuations.
In a recent research note, HIB stated that inventories are expected to draw down following the seasonal peak as output eases and the delayed impacts of El Niño begin to manifest. The bank maintained its average CPO price forecasts at RM4,450 per tonne for 2026 and RM4,500 per tonne for 2027, retaining an 'Overweight' stance on the plantation sector.
MBSB Investment Bank Bhd anticipates that CPO prices will remain soft in October 2026, averaging approximately RM4,518 per tonne, representing a 2.1 per cent month-on-month decline. While the probability of a strong El Niño has risen to 90 per cent—sparking concerns over supply disruptions—persistently high stockpiles are expected to keep prices within a specific range. The bank warned that inventories could approach the four million tonne mark if production continues to climb, further limiting potential price gains.
Meanwhile, CIMB Securities Sdn Bhd expects near-term trading to fluctuate between RM4,400 and RM4,600 per tonne. The firm highlighted that while higher energy prices have bolstered biodiesel economics, prolonged dry conditions and haze in Indonesia and Malaysia, exacerbated by reduced fertilizer application, could constrain output starting in 2027. Forward markets already reflect these tightening expectations, with April-May 2027 futures trading at a premium of more than RM494 per tonne over December 2026 contracts.
Apex Securities Bhd estimated that cumulative production through September reached 71 per cent of its full-year 2026 forecast of 20.7 million tonnes. While maintaining its production outlook, the firm noted that El Niño's lagged effects may hit output in early 2027. Furthermore, the firm identified the Budget 2027 minimum wage hike to RM2,000 as a critical factor, noting the 17.6 per cent increase could impact plantation companies' net profits by up to 10 per cent.
Source: Malaysia-China Insight