Plantation stocks face near-term pressure as palm oil stockpiles hit record high

TA Securities (TA) has maintained its Overweight recommendation on the local plantation sector despite a sharp increase in palm oil stockpiles in September, citing expectations of stronger demand and tighter supply next year.

In its latest report, the research house said higher production, weaker exports and softer domestic consumption had pushed inventories to a record high, putting near-term crude palm oil (CPO) prices under pressure.

The increase in production was largely attributed to seasonal factors, with fresh fruit bunch yields improving across all major regions.

However, TA expects output to ease in 2027 as the effects of El Niño potentially weigh on yields in Malaysia and Indonesia.

Although the latest inventory build-up could keep CPO prices volatile in the coming months, the research house remains optimistic about the medium-term outlook.

Demand from India could provide some relief as disruptions to sunflower oil shipments through the Black Sea have encouraged buyers to switch to palm oil.

Recent import duty cuts in India could also support purchases and help reduce excess inventories.

Meanwhile, Indonesia’s biodiesel programme remains a key source of support.

The potential introduction of its B60 mandate next year could increase domestic palm oil consumption, leaving less supply available for exports.

TA also cautioned that abundant global soybean supplies could limit gains across the broader vegetable oil market.

Nevertheless, it expects the combination of stronger demand, biodiesel consumption and possible weather-related supply constraints to support CPO prices in 2027.

The research house maintained its average CPO price assumption of RM4,300 per tonne for 2026.

Among its preferred stocks, TA continues to favour SD Guthrie for its diversified upstream operations, environmental, social and governance credentials, and potential value creation from land monetisation initiatives.

It also retained Buy recommendations on Kuala Lumpur Kepong, IOI Corp and United Malacca.

However, TA Securities warned that weaker CPO prices, lower crude oil prices, softer global edible oil demand and reduced price competitiveness against soybean oil could undermine the sector’s performance. —Oct 13, 2026

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