PETALING JAYA: RHB Research believes the combination of a high-probability strong El Nino weather phenomenon and more stringent Indonesian export controls creates a bullish environment for crude palm oil (CPO) prices heading into 2027.
Its price outlook for CPO is currently anchored at a baseline assumption of RM4,400 per tonne for 2026 and RM4,300 per tonne for 2027, but warned that CPO prices could rise instead of falling in 2027 if El Nino and policy trends intensify.
Historically, it noted that El Nino usually results in a yield drop of between 2% and 20%.
“During the two strong El Nino episodes in 1997 to 1998 and 2015 to 2016, there was a 17% decline in yield in 1998 to 1999 and a 14% decline in 2016 to 2017 – that is, a one-year lagged impact.
“The average CPO prices rose by as much as 21% during the El Nino years and by an additional average of 26% one year after El Nino,” the research house stated in a report on the plantation sector.
It has upgraded the sector from “neutral” to “overweight” due to the two factors.
The US National Oceanic and Atmospheric Administration also declared an official El Nino Advisory, predicting it to intensify to a moderate or strong level.
RHB Research added that Indonesia’s new natural resources export governance scheme acts as a secondary price driver.
With a hard implementation deadline at the end of 2026, exporters will face tighter monitoring, monthly reporting requirements, and a mandate to keep all earnings in Indonesian state banks.
