Analysts stay cautious on plantation sector as rising palm oil inventory points to softer CPO prices in 2026

Analysts remain cautious on Malaysia’s plantation sector as rising stock levels and strong production are expected to weigh on crude palm oil (CPO) prices heading into 2026, despite resilient earnings this year.

November’s CPO prices averaged around RM4,090 per metric tonne, with production continuing to grow with output rising nearly 20% year-on-year. However, exports fell to a decade-low in November amid subdued demand from traditional buyers from countries such as India and China, says analysts.

As supply is outpacing demand, with higher output and stockpiles in both Malaysia and Indonesia likely to limit upside for prices, analysts expect CPO prices to remain range-bound in the near term and to moderate further in 2026.

In a research note on Thursday, MBSB Investment Bank said that the potential implementation of Indonesia’s B50 biodiesel mandate — where 50% of biodiesel in diesel fuel must come from palm oil — in the second half of 2026, could tighten supply locally.

“The outlook remains hazy in between supply and demand dynamic, where shortage in PO (palm oil) might be coming by neighbour aggressiveness policy such as [the] impending B50 implementation in 2HCY2026 by the government of Indonesia,” said MBSB.

The research house expects CPO prices to remain range-bound in the near term, with average prices projected at RM4,223 per tonne in December ahead of pollination months.

Analysts also highlighted rising global edible oil stocks as a factor in tempering price gains. Kenanga Investment Bank said stronger European rapeseed and sunflower harvests, coupled with expanded soybean planting in Latin America, could add five- to seven million metric tonnes of edible oil supply in 2026.

Although rising edible oil may weigh on CPO prices, Kenanga offered a differing view on Indonesia’s potential B50 mandate, noting that it could provide support for palm oil prices by creating guaranteed domestic demand. The policy could absorb an additional three- to four million metric tonnes of palm oil annually, helping to offset weak exports and high stockpiles, and limiting further downward pressure on prices.

Kenanga also pointed to growing contributions from non-plantation segments, including real estate, renewable energy, and fibre-based initiatives, which are expected to provide alternative earnings streams for some groups in the medium term.

Kenanga kept their 2025 forecast of RM4,300 per metric tonne, which is expected to fall to RM4,000 per metric tonne for 2026. Meanwhile, MBSB expects prices would moderate to around RM4,300 per metric tonne for 2025 and RM4,200 per metric tonne for 2026.

Overall, analysts maintain a neutral stance on the sector, citing a balanced supply-demand outlook for CPO in 2026, limited near-term catalysts, and valuations that already reflect expectations of softer earnings.