TA Research said palm oil output is expected to reach 80 million tonnes, accounting for over 43% of incremental supply.
PETALING JAYA: Crude palm oil (CPO) prices are expected to moderate, averaging around RM4,000 per tonne going into 2026, down by 4.8% year-on-year (y-o-y), according to TA Research.
This easing price outlook is underpinned by rising global production, softer export demand from China and India and intensifying competition from alternative edible oils as supply recovers in sunflower and soybean-producing regions.
In a note to clients, the research house said while production growth should support overall yields, the softer price environment would likely keep upstream margins contained, especially for producers with higher cost structures.
Note that CPO futures on Bursa Malaysia had slipped below the RM4,000 per tonne level, reflecting weaker demand, rising production and increasing competition from rival oils.
Against this backdrop, the US Department of Agriculture’s 2025 to 2026 outlook pointed to a more constructive production environment, with global vegetable oil output projected to rise 1.6% y-o-y to 233.3 million tonnes, led by stronger palm oil production and resilient soybean oil supply.
According to TA Research, palm oil output is expected to reach 80 million tonnes, accounting for over 43% of incremental supply, which should help ease overall market tightness.
“With supply improving faster than demand, upside to CPO prices is likely to remain capped,” the research house added.
On the demand side, global consumption is forecast to remain firm, rising by 2.6% y-o-y, largely driven by continued strength in palm oil usage, which TA Research said is primarily supported by food and biofuel applications.
However, the improved supply outlook is expected to help stabilise the global balance.
As a result, palm oil ending stocks are projected to remain broadly unchanged at 29.8 million tonnes, while the stocks-to-use ratio improves marginally to 13.1%.
“Although still relatively low, this ratio points to a gradual easing of market tightness and suggests that the ongoing supply recovery is beginning to gain traction,” TA Research added.
The research house, which is “neutral” on the plantation sector, maintained “buy” calls on Kuala Lumpur Kepong Bhd
at a target price of RM23.09 and TSH Resources Bhd with a target price of RM1.43 per share.
TA Research also has “hold” calls on SD Guthrie Bhd, setting a target price of RM5.63 and United Malacca Bhd with a target price of RM6.29 respectively.
Meanwhile, it rated both IOI Corp Bhd and Kim Loong Resources Bhd as a “sell” due to their high valuations.
The risks to the sector’s recommendation include South America’s soybean supply turning out to be lower than market expectations, a more promising demand recovery story, lower-than-expected palm oil production and significant reductions in production costs.
