Plantation: Seasonal Supply Builds, CY27 Tightness Looms

PETALING JAYA, Aug 11, 2026 — The plantation sector continues to show seasonal strength, with July crude palm oil (CPO) production rising 9.4% month-on-month (MoM) to 1.79 million tonnes, driven by Peninsular Malaysia and Sarawak. Seasonal improvements are expected to persist through the remainder of CY26, though analysts caution that El Niño impacts could weigh on yields in CY27.

Exports rose 14.5% MoM to 1.39 million tonnes, supported by India’s festive-season restocking, which is expected to sustain near-term demand. Inventories climbed 3.3% MoM to 2.63 million tonnes, consistent with typical second-half seasonal build-ups. However, the stock-to-use ratio (STU) fell to 1.54x from June’s 1.67x, indicating stronger demand partially offsetting supply growth.

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CPO prices averaged RM4,493 in July, remaining stable despite volatility in global oil markets. Analysts expect average prices of RM4,600 in 2HCY26, RM4,800 in 1HCY27, and RM4,600 in 2HCY27, maintaining forecasts of RM4,500 for CY26 and RM4,700 for CY27. Supply tightness in CY27, coupled with sticky biodiesel mandates and steady demand, is expected to support prices.

While production is forecast at 20.7 million tonnes for CY26, output in 1HCY27 could be flat or lower by about 7% year-on-year due to lagged El Niño effects. Should weather conditions persist longer than anticipated, yield impacts could extend into 2HCY27, presenting upside risks to price assumptions.

Analysts maintain an Overweight stance on the sector, highlighting integrated players for resilience and upstream-focused firms for value and dividends. The sector’s outlook remains supported by strong demand fundamentals, seasonal supply dynamics, and policy-driven biodiesel consumption.

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