PETALING JAYA: Tighter supply deficits for global edible oils will likely see crude palm oil (CPO) prices trading firm in the RM4,000-RM4,800 per tonne range for the first half of 2025 (1H25), according to analysts.
The latest end-2024 palm oil data released by the Malaysian Palm Oil Board showed inventory dipped to 1.7 million tonnes, down 25% year-on-year (y-o-y).
According to Kenanga Research, the edible oil market is facing another deficit in 2025 as this year’s supply increase is unlikely to meet the usual demand growth.
“As such, edible oil prices, including palm oil, are likely to stay firm, potentially even inch higher so as to help temper demand growth towards 1%-2% y-o-y, rather than trendline growth of 3%-4% y-o-y,” the research house said in a report.
Kenanga Research said the recent CPO price correction was expected, given the high premium palm oil had been trading at recently compared to soybean oil.
Hence, it maintained its forecasts based on an average CPO price of RM4,000 per tonne for 2024 and 2025.
“Our preference is for purely upstream planters with less volatility and more attractive valuations such as Hap Seng Plantations Holdings Bhd at a target price (TP) of RM2.70 (per share), Genting Plantations Bhd
(TP: RM6), TSH Resources Bhd (TP: RM1.35) and United Malacca Bhd (TP: RM6.30).”
For larger players, Kenanga Research’s picks included IOI Corp Bhd (TP: RM4.30) and PPB Group Bhd (TP: RM16.50).
MIDF Research, in a note to clients, kept a positive outlook on the sector, but “foresee only a handful of players likely to benefit from the elevated CPO prices.”
Unlike in 2022, the research house noted that the local CPO production as of the third quarter of 2024 (3Q24) had underperformed, with many small planters such as TSH, Ta Ann Holdings Bhd and Sarawak Plantation Bhd unable to fully capitalise on higher CPO prices due to a contraction in production and sales volume.
Instead, MIDF Research suggested focusing on larger players such as IOI (TP: RM4.42), SD Guthrie Bhd (TP: RM5.43), and Genting Plantations (TP: RM6.10), as more than 50% of their CPO procurement comes from their own estates, offering greater stability in realising CPO prices.
“Jumping into January 2025, with the expected slower recovery in the local output amidst low stock level on top of delayed B4O (biodiesel blend policy) in Indonesia, we anticipate the average CPO price to stabilise at RM4,815 per tonne,” it added.
Additionally, MIDF Research expected a favourable trajectory for CPO prices, potentially rising from RM4,500 per tonne to nearly RM5,000 per tonne in 2Q25.
Meanwhile, RHB Research kept its CPO price assumptions of RM4,300 per tonne in 2025 and RM4,100 per tonne in 2026.
It expected prices to remain higher in 1H25, trading between RM4,400 and RM4,800 per tonne, before moderating in 2H25 to RM4,000-RM4,400 per tonne during the seasonal peak.
The research house also anticipated a more apparent global oils and fats deficit in 2025, driven by low output and stock levels in Indonesia in 2024, higher biodiesel mandates in Indonesia in 2025, and tightening supplies of sunflower seed, rapeseed and canola.
“This will in turn lead to stronger prices for vegetable oil in 2025, with stock to usage ratio for the 17 oils and fats falling to a 15-year low of 12.6% in 2025 versus the historical average of 13.6%,” it added.
RHB Research maintained an “overweight” call on the sector, as it believed higher and stickier prices in 2025 should lead to a sector rerating.
