Malaysia's Plantation Sector Poised for Biodiesel-Driven Boom

The plantation sector in Malaysia is expected to benefit from strong demand for biodiesel and tight edible oil supplies, leading to higher prices for crude palm oil (CPO) over the next year. CPO prices have already risen 7% since the first half of 2026, reaching RM4,612 per tonne in August.

Kenanga Research, a research house, has maintained its 'overweight' rating on the plantation sector due to several supply and demand factors that could support CPO prices. The firm noted that edible oil supplies are already tight, with the ongoing Middle East conflict increasing demand for biodiesel.

Additionally, shipping disruptions in the Black Sea have constrained sunflower oil exports from Ukraine, further tightening global edible oil supplies. A potentially severe El Nino is also expected to weigh on palm oil production through forest fires, haze-related disruptions, and weaker fresh fruit bunch yields in 2027.

Historically, a strong El Nino has reduced palm oil output by 2% to 9%, which could push CPO prices up by 5% to 10%. Kenanga Research has maintained its CPO price assumptions at RM4,500 per tonne for 2026 and RM4,700 per tonne for 2027.