Delayed palm oil peak season pushes CPO towards RM4,600 per tonne in first half of 2026 — Glenauk Economics

Crude palm oil (CPO) prices are expected to remain firm, trading between RM4,300 and RM4,600 per tonne in the first half of 2026, according to a forecast by Glenauk Economics.

This price strength is supported by a significant delay in the industry’s peak production season, with yields now only expected to trend downwards in December 2025 and January 2026.

The benchmark CPO futures on the Bursa Malaysia Derivatives Exchange closed at RM4,115 per tonne on Monday.

The research house, cited in a report by CIMB Securities, warned that potential heavier rainfall across northern Peninsular Malaysia could quickly reduce fresh fruit bunch yields, as access to estates becomes difficult, disrupting harvesting activities.

While short-term volatility linked to biodiesel policy changes in Indonesia exists, “palm oil fundamentals remain firm”, Glenauk noted.

Glenauk expects palm oil production to strengthen in 2026, with Indonesia’s output rising by 3%, and Malaysia’s by 1% to between 19.6 and 19.8 million tonnes, which is below market’s expectation of 20 million tonnes.

The slower growth in Malaysian output is expected to be due to higher replanting rates, especially in Sabah, where about 4% of the planted area will be replanted in 2025. “Thus, while a brief surge may lift output, total production will likely normalise to 19.6-19.7 million tonnes depending on weather — behind current market estimates,” Glenauk said.

For 2025, Glenauk expects Malaysia’s production to also grow by just 1% to 19.34 million tonnes, while Indonesia’s output is likewise expected to rise 3% to 47.69 million tonnes. The firm also foresees a sharp slowdown in output in the fourth quarter of 2025 (4Q2025) and 1Q2026 due to tree stress after the higher yields seen so far this year.

The delayed peak output and tight end-stocks are key factors supporting Glenauk’s more bullish CPO projection, compared with CIMB Securities’ in-house estimates of RM4,330 per tonne for 2025 and RM4,200 per tonne for 2026.

“Overall, Glenauk foresees limited downside for CPO and expects prices to strengthen in early 2026, supported by tight supply, resilient biodiesel demand, and continued policy support,” Glenauk said.

This is expected to be positive for Malaysian plantation companies, which stand to benefit from firmer prices and potentially stronger earnings, but neutral to slightly negative for Indonesian players due to the expected increase in export levies.

Among them, CIMB Securities keeps “buy” ratings on IOI Corp Bhd (KL:IOICORP), SD Guthrie Bhd (KL:SDG), Ta Ann Holdings Bhd (KL:TAANN), and Hap Seng Plantations Holdings Bhd (KL:HSPLANT), citing their limited exposure to Indonesia and favourable leverage to Malaysian CPO prices.

On the policy front, Glenauk expects Indonesia to maintain its B40 biodiesel mandate in the first half of 2026, before progressing to B45 by the second half. To fund the programme, export levies are expected to rise by 5% to 7.5%, bringing the total levy to 15%-17.5%, between November 2025 and January 2026.

Under the current B40 mandate, 23% of Indonesia’s CPO output is used for biodiesel production. This share could rise to 41% under a full B50 rollout, which would consume about 21 million tonnes of CPO, or 25% more than current requirements.