Plantation Sector ROE Seen Remaining Robust In 2026–2027 On Strong CPO Prices, Supply Tightness -- Kenanga IB

KUALA LUMPUR, April 30 (Bernama) -- Return on equity (ROE) for the plantation sector is expected to remain robust in 2026–2027, supported by firm crude palm oil (CPO) prices amid supply tightness and the ongoing West Asia conflict, said Kenanga Investment Bank Bhd (Kenanga IB).

In a research note, the investment bank said the sector has been on an uptrend since 2019. The conflict has also lifted biodiesel demand, pushing CPO prices from RM4,019 per tonne in January to between RM4,500 and RM4,700 in April.

“This increase in CPO prices should more than offset higher input costs, particularly fertiliser and fuel. We maintain our CPO price assumptions of RM4,250 per tonne for CY2026 and RM4,200 for CY2027,” it said.

Kenanga IB said elevated edible oil prices have become increasingly sticky due to supply constraints, as palm oil, the most productive oil crop, has seen significantly slower area expansion.

Demand, however, continues to grow, while yields from other oil crops are not improving fast enough to bridge the gap.

Although opening inventories this year were better than expected following a strong harvest, global edible oil supply is still projected to remain tight for  2026 to 2027, even before factoring in the West Asia conflict, as supply growth struggles to keep pace with demand, resulting in only marginal inventory gains.

The bank added that supply growth has slowed to about two per cent from four per cent since 2018, due to weaker palm oil expansion and Indonesia’s moratorium on new oil palm planting permits.

“The impact of tighter supply on edible oil prices is reflected in the Food and Agriculture Organisation Food Price Index, which tracks global prices of commodities such as meat, dairy, cereals and sugar.

“The prices of edible oils which have risen most since 2019, a two to three times more than the prices of other food commodities and we expect it to stay for the coming few years,” it added.

-- BERNAMA