PETALING JAYA: The plantation sector is set to benefit from tighter edible oil supplies and firmer demand for biodiesel, with crude palm oil (CPO) prices likely to remain elevated over the next 12 months.
The sector could also gain further upside if a strong El Nino disrupts palm oil production and tightens global edible oil supplies.
Kenanga Research maintained its “overweight” rating on the plantation sector, citing several supply and demand factors that could support CPO prices.
“Edible oil supply tightness was already in the backdrop at the start of 2026,” it said.
The research house noted that the ongoing Middle East conflict had increased demand for biodiesel, while shipping disruptions in the Black Sea could constrain sunflower oil exports from Ukraine.
At the same time, a potentially severe El Nino could weigh on palm oil production through forest fires, haze-related disruptions and weaker fresh fruit bunch yields in 2027.
“Historically, a very strong El Nino has reduced palm oil output by 2% to 9%, which could in turn push CPO prices up by 5% to 10%,” Kenanga Research said.
It, therefore, maintained its CPO price assumptions at RM4,500 per tonne for 2026 and RM4,700 per tonne for 2027.
CPO prices have already climbed 7% from the first-half 2026 average of RM4,329 per tonne to RM4,612 per tonne in August.
With haze returning to South-East Asia and El Nino expected to worsen towards year-end, Kenanga Research expects CPO prices to remain high over the next three to six months.
“Compounded by higher bio-diesel demand from the ongoing Middle East conflict and Black Sea shipping disruption of Ukrainian sunflower exports, prices for CPO are expected to stay high for the coming three to six months,” it said.
The stronger commodity environment was reflected in plantation earnings in the second quarter of financial year 2026.
