PETALING JAYA: The vegetable oil market is supported by increasing demand which will lead to further gains for crude palm oil (CPO) prices, according to CGS International Research.
The research house said there is strong increment in global biodiesel demand expected in 2026, putting a structural floor for global vegetable oil prices.
“This is mainly underpinned higher biodiesel policies from soybean or palm oil producing countries, especially from the United States, Indonesia and Brazil.
“The combined biodiesel production of the three countries contributed to 60% of total global biodiesel production in the year-to-date period,” it said.
Given the situation, the research house had lifted its CPO price assumption to RM4,350 per tonne for this year and RM4,500 per tonne next year from a forecast of RM4,200 per tonne and RM4,000 per tonne respectively.
Also supporting the price forecast is major soybean and palm oil producing countries having increased their domestic consumption through biofuel mandates that is expected to limit both soybean and palm oil exports.
This could lift global vegetable oil prices given that soybean oil and palm oil combined accounted for 69% of total global major vegetable oil exports this year, it said.
Specific factors supporting its CPO price forecasts include slower palm oil supply growth and long-term supply risks from land issues in Indonesia, it said.
The archipelago saw 1.5 million ha of plantations having been seized and 1.8 million ha are under review, based on reports by Jakarta Global and InfoSAWIT and this potentially reduces production from the second half next year and further supports domestic CPO prices.
Also, any weather anomalies are expected to curb supply.
“We expect global palm oil production growth to moderate to 2% year-on-year (y-o-y next year, following a strong 6% y-o-y jump this year after a marked recovery in Indonesia from the impact of El Nino.
“Malaysia’s palm oil production growth is expected to be lower next year due to smaller planted areas and slower replanting activities compared with the last three to five years,” CGSI Research said.
According to the National Oceanic and Atmospheric Administration, La Nina conditions emerged in September and are likely to persist until February 2026 which could lead to episodic harvest and logistics disruptions, it said.
On plantation companies that are under its coverage, the research house said Genting Plantations Bhd
, SD Guthrie Bhd and Hap Seng Plantations Holdings Bhd stood to deliver the strongest earnings uplift with every 5% rise in CPO price.
“With the current strong CPO price momentum, we expect upstream plantation companies to benefit more significantly than downstream players, while integrated players’ earnings may be diluted by the higher feedstock prices,” it said.
“We upgrade our sector rating from ‘neutral’ to ‘overweight’ on stronger global biodiesel demand and limited palm oil supply leading to strong CPO price momentum.
“We favour pure upstream players for their direct CPO exposure, strong earnings momentum and dividend yields of up to 8% in 2026,” it added.
