CPO prices likely to hold above RM4,000

PETALING JAYA: Crude palm oil (CPO) prices are expected to remain firm in the coming months despite rising palm oil inventories, as stronger energy prices, biodiesel demand and growing weather risks provide a floor for prices, analysts say.

BIMB Research expects CPO prices to hold at current elevated levels over the next three months, with seasonal peak production and high inventories capping the upside, while the market could remain firm into 2027 as the lagged impact of El Niño potentially tightens regional supply.

“We maintain our CPO price forecasts of RM4,400 per metric tonne for 2026 and RM4,500 for 2027, with an upside bias to our forecast,” it said in a report.

Malaysian Palm Oil Board (MPOB) CPO price strengthened further in August, averaging RM4,549 a tonne, up 1.2% month-on-month and 5.1% year-on-year.

The research house said this was the highest monthly average since April despite weaker exports.

The increase was driven mainly by supply-side risks, alongside growing El Niño concerns and energy-related factors.

“Gas oil prices rallied through August and into early September amid geopolitical disruptions, widening palm oil’s discount to gas oil to US$315 a tonne, compared with a five-year average premium of US$180 a tonne. This shift materially improves the economics of biodiesel.

“Meanwhile, the average CPO price for the first eight months of 2026 stood at RM4,413 a tonne, broadly in line with our full-year 2026 forecast of RM4,400 a tonne.”

While maintaining its “overweight” call on the sector, BIMB Researchsaid cost pressures, particularly from higher fertiliser prices, remained a key risk, although these were expected to remain manageable in the near term.

The research house said it preferred upstream-focused planters, which offer the clearest earnings leverage to higher CPO prices going into 2027, given the potential for tighter supply.

“Hap Seng Plantations Bhd remains our top pick, supported by its high upstream earnings sensitivity, healthy balance sheet, with net cash per share of about 92 sen as at the first half of financial year 2026, and attractive dividend yield of about 4%.

“Among large-cap names, we favour SD Guthrie Bhd for its scale, improving upstream performance and recurring industrial development earnings, which provide an additional buffer against plantation-cycle volatility.”

Meanwhile, UOB Kay Hian (UOBKH) Research maintained its CPO price forecasts at RM4,500 and RM4,400 a tonne for 2026 and 2027, respectively, compared with MPOB’s August average of RM4,548.50 a tonne.

For its stock picks, the research house favoured SD Guthrie Bhd as a liquid large-cap play on the CPO outlook, supported by its renewable energy and industrial park expansion.

It named Kuala Lumpur Kepong Bhd as its laggard pick, citing a progressive recovery in downstream earnings.

“Production should peak in September and October, and we maintain our view that palm oil stocks could test three million tonnes by end-September.

“Rainfall in August was the lowest this year at 152 millimetres (mm), with the western part of Peninsular Malaysia and Sarawak recording below-average rainfall of 108mm and 136mm, respectively.

“More immediately, the inventory build is export-led rather than supply-led,” UOBKH Research said.