PETALING JAYA: Budget 2027 is expected to focus on boosting replanting among independent smallholders, while the plantation industry could also seek relief from rising operating costs through changes to the windfall profit levy (WPL) and a more measured approach to minimum wage increases.
These measures will be important for the sector as planters head into 2027 amid potentially tighter supply conditions and elevated crude palm oil (CPO) prices, according to Apex Securities Research.
In a note, the brokerage said it expects plantation-specific measures to remain predominantly focused on independent smallholders, with replanting support likely to be a key priority.
Malaysia’s national replanting rate remains around 3.4%, below the 4% target, while the rate among independent smallholders was even lower at 0.7% in 2025.
“We, therefore, expect the government to consider an expansion of the Smallholder Oil Palm Replanting Financing Incentive Scheme through higher allocations, larger grants, improved financing terms or easier access for independent smallholders,” it wrote.
The brokerage believes such measures would support the industry’s long-term productivity, although the direct earnings impact on large listed plantation companies is likely to remain limited.
Further assistance for Malaysian Sustainable Palm Oil or MSPO certification could also feature in Budget 2027, particularly for uncertified smallholders.
The WPL could be another key issue for the sector. The current structure imposes a 3% levy when monthly average CPO prices exceed RM3,150 per tonne in Peninsular Malaysia and RM3,650 per tonne in Sabah and Sarawak.
With CPO prices remaining well above these thresholds and estate costs rising due to higher diesel and fertiliser prices, Apex Securities Research expects the industry to push for changes to the levy.
“Therefore, we believe the industry could push for a higher WPL threshold or an adjustment to the levy structure to provide a tangible reduction in the effective levy burden,” it said.
The brokerage cautioned that a significant increase in the threshold would be required given elevated CPO prices and the need to determine whether the current price and cost environment would persist long enough to justify such a change.
The minimum wage is another potential concern heading into Budget 2027, given the sector’s relatively labour-intensive nature.
Apex Securities Research expects higher wages to raise estate operating costs, although the impact should be partly mitigated by elevated CPO prices.
It remains “overweight” on the plantation sector, supported by a favourable CPO price environment and improving supply-demand dynamics.
Apex Securities Research maintains its 2026 and 2027 average CPO price forecasts at RM4,500 and RM4,700 per tonne, respectively.
“We expect 2027 supply tightness, stable underlying demand and firm biodiesel requirements to remain supportive of CPO prices,” it said.
“We, therefore, prefer companies with higher upstream exposure, stronger production profiles and direct earnings sensitivity to CPO prices,” it added.
Meanwhile, one analyst told StarBiz that the plantation sector is likely to see supply tighten and costs stay elevated.
“However, strong CPO prices will continue to drive earnings for many planters,” he said, highlighting his optimism on the sector’s prospects.
