SDG: Global Palm Oil Market Anticipates Range-Bound Prices in 2026

The global palm and lauric oils sector is expected to navigate a largely range-bound year in 2026, with Crude Palm Oil (CPO) prices anticipated to trade between MYR3,800 and MYR4,400 per tonne. This outlook stems from the annual Palm & Lauric Oils Price Outlook Conference & Exhibition (POC 2026), where most speakers maintained a cautious stance, with only a few providing specific price forecasts. The overall sector rating remains Neutral.

While an average price range for 2026 was generally uniform, some speakers noted discrepancies between the first and second halves of the year, with expectations for higher prices in 1H26 and potentially softer prices in 2H26. However, some more bearish voices suggested a CPO price correction is imminent, driven by lower crude oil prices and a robust supply of soybean oil (SBO).

Supply-Side Challenges and Dynamics

Key discussions at POC 2026 highlighted ongoing issues such as declining yields, the urgent need for mechanisation, and sustainability requirements across the palm oil industry. Long-term supply is at risk if yields do not improve, exacerbated by the continuous growth in US and South American soy crop acreage, which poses a significant substitution risk. Over the last five years, SBO output has grown at a Compound Annual Growth Rate (CAGR) of 6.2%, significantly outpacing palm oil’s 1.1% growth, potentially eroding palm oil’s competitive advantage as the cheapest vegetable oil.

Factors that could significantly alter forecasts include higher-than-expected production losses in Indonesia due to government intervention, changes in biofuel policies and mandates in key regions like the US, Indonesia, and Brazil, potential adverse weather events such as El Niño, and the impact of weak energy prices or slowing economic growth on demand.

Demand Drivers: Biofuels and Oleochemicals

The global biofuel sector is poised to remain a critical demand driver. International mandates are expected to fuel an additional 7-8 million tonnes of biomass-based diesel demand in 2026, rising by another 6 million tonnes in 2027. This growth is underpinned by aggressive biofuel mandates in major economies, a growing shortage of waste-based feedstocks, and a decelerating growth rate of primary vegetable oil supply. The US is projected to see a surge in bio-based diesel demand, impacting SBO exports, while Indonesia’s B40 biofuel mandate will continue to support domestic palm oil demand. Conversely, the EU and UK are gradually shifting their focus from palm oil to waste oils and rapeseed oil for biofuel production.

The oleochemicals market outlook for 2026 will be shaped by feedstock constraints, competitive pressures, and evolving regulatory frameworks. While global production of fatty acids and alcohols is projected to grow, significant new capacity additions in Asia are expected to pressure margins. Access to feedstock, particularly palm kernel oil and animal fats, remains a key competitive advantage and a significant limitation for producers, further complicated by the EU Deforestation Regulation (EUDR).

Investment Implications

Given the anticipated range-bound CPO prices and a balanced supply-demand dynamic, the investment bank maintains its Neutral sector call. While some speakers predict a short-term market resembling a “bubble” due to high valuations, the longer-term outlook suggests that structural supply deficits for palm oil could eventually lead to higher price ranges. Investors are advised to focus on companies with strong operational efficiencies and diversified market positions. Among the top picks for the sector, Johor Plantations Group continues to be rated as a BUY, with a target price of RM1.80, indicating a potential upside of 19.2% from its last traded price of RM1.51.