Malaysia: CGS Sees CPO Price Rally Into 2026 Due To Supply Risks, Forecasts RM4,500

CGS International has revised its crude palm oil (CPO) price forecast upwards to RM4,350 per tonne for 2025 and RM4,500 per tonne for 2026, citing tighter global supply, stronger biodiesel demand, and long-term structural risks in Indonesia’s palm oil sector.

The research house noted that global vegetable oil exports are expected to tighten as biodiesel demand accelerates, while palm oil supply growth slows. Additionally, ongoing land legality reviews and seizures in Indonesia, which have affected over 3.3 million hectares of plantations, could weigh on production from the second half of 2026 onwards — lending further support to prices.

“Our revised assumptions reflect the combined effects of rising biodiesel mandates, constrained land expansion, and increasing geopolitical uncertainty. These factors are likely to keep CPO prices elevated over the medium term,” CGS International said in its report.’

Based on its earnings sensitivity analysis, upstream-focused plantation companies are expected to see the largest boost in profitability from higher CPO prices. In Malaysia, Genting Plantations (GENP), SD Guthrie (SDG) and Hap Seng Plantations (HAPL) are projected to record the strongest earnings uplift for every 5% increase in CPO price.

Conversely, downstream and integrated players may experience diluted margins as higher feedstock costs offset processing gains. Taking into account revised export levies, duties and higher production costs such as fertiliser, CGS identified HAPL, SDG, and Ta Ann Holdings (TAH) as the key beneficiaries within its Malaysian coverage.

Following the revision, CGS International upgraded its plantation sector rating from “Neutral” to “Overweight”, driven by the positive price momentum and resilient demand outlook. The firm expects strong earnings momentum and dividend yields of 7–8% for FY2026 among leading upstream producers.

CGS also initiated coverage on two Singapore-listed players — Bumitama Agri Ltd (BAL SP) and First Resources Ltd (FR SP) — assigning both an ‘Add’ recommendation. BAL is favoured for its high leverage to CPO prices and strong dividend payout, while FR is lauded for its balanced expansion strategy across the upstream and downstream segments.

The firm’s top regional picks include SD Guthrie, Hap Seng Plantations, and Ta Ann Holdings in Malaysia, as well as Bumitama Agri and First Resources in Singapore.

CGS highlighted potential re-rating catalysts such as tighter global vegetable oil supply due to geopolitical tensions or adverse weather conditions. However, it also cautioned that downside risks remain, particularly from weaker demand or unfavourable policy shifts in Indonesia’s palm oil sector.

“We believe the strong price momentum will continue to support upstream players’ earnings and share price performance, even amid short-term policy noise,” the report concluded.

Tags: exports, Indonesia, prices, Vegetable Oil, Crude palm oil, biodiesel, forecast, demand, Plantations