Indonesian drought could lift Malaysian planters
KUALA LUMPUR: Malaysian plantation companies could benefit from firmer crude palm oil (CPO) prices in 2027 as worsening drought conditions in Indonesia threaten to tighten regional supply.
KUALA LUMPUR: Plantation firms in Malaysia may benefit from higher palm oil prices in 2027 due to Indonesia's worsening drought conditions, according to CIMB Securities Sdn Bhd. The firm, which rated Malaysian plantation sector as "Overweight," highlighted Wilmar International Ltd's updated production outlook as evidence. Wilmar, a major oil palm plantation group with 234,334 hectares of plantations, now expects a decline in fresh fruit bunch (FFB) production at its Indonesian estates this year.
This is a shift from their earlier forecast of slight growth. The revised outlook indicates potential supply disruptions in 2027, which could favor Malaysian plantation companies. However, CIMB Securities cautioned that near-term price gains may be limited by high Malaysian palm oil inventories, weak consumption, and the potential influx of sunflower oil from the Black Sea region.
They also noted that a significant recovery in palm oil demand from Chinese buyers might depend on a sustained price discount against soybean oil.
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