InfoSAWIT, KUALA LUMPUR – Persistently high crude palm oil (CPO) prices may not fully translate into positive outcomes for the palm oil industry, as rising fertilizer and logistics costs are expected to weigh on plantation companies’ performance in the second half of 2026.

Citing The Edge Malaysia (March 24, 2026), MBSB Research noted that cost pressures will become more pronounced, particularly for upstream players, due to increasing urea prices and logistics costs linked to higher diesel prices.

“Cost pressures are expected to emerge in the second half of the year, particularly from rising fertilizer and logistics costs,” MBSB stated.

Downstream players are also likely to face higher freight costs and insurance premiums amid global uncertainties.

Cost Pressures Offset High CPO Prices

CIMB Securities noted that while higher CPO prices provide support to the plantation sector, the benefits may be partially offset by rising input costs.

“The gains from higher CPO prices are likely to be partly offset by increased fertilizer costs driven by higher energy prices,” CIMB stated.

Energy prices have risen due to escalating tensions in the Middle East, including disruptions around the Strait of Hormuz, which have pushed global oil prices higher and improved biodiesel economics.

Since late February, CPO prices on Bursa Malaysia have risen by approximately 9.5% to RM4,428 per ton, supported by stronger energy prices and US soybean oil.

However, analysts warned that prolonged geopolitical conflicts could have broader implications for production costs and global demand.

RHB Research highlighted that fertilizer costs account for around 20%–30% of total plantation operating costs, while transportation and logistics make up about 5%–10%.

“Fertilizer supply could be disrupted and costs may rise further if the conflict persists,” RHB noted.

High energy prices could also dampen global economic growth, potentially weakening palm oil demand.

Prices Expected to Remain Strong Despite Volatility

Despite rising costs, most analysts still expect CPO prices to remain firm throughout 2026, with average projections ranging from RM4,100 to RM4,300 per ton.

Hong Leong Investment Bank maintains its forecast at RM4,200 per ton, while RHB Research estimates RM4,250 and Apex Securities RM4,300 before normalizing to RM4,200.

Phillip Capital sees upside potential to RM4,500 per ton, supported by low production cycles, seasonal demand, and palm oil’s price competitiveness amid geopolitical risks.

Maybank Investment Bank projects an average of RM4,100 per ton, with upside potential if crude oil remains above US$100 per barrel and Indonesia implements the B50 biodiesel program.

On the supply side, data from the Malaysian Palm Oil Board (MPOB) showed that Malaysia’s palm oil stocks fell 3.9% in February to 2.7 million tons—the lowest level since October.

This decline was driven by an 18.6% drop in production to 1.28 million tons and a 22.5% fall in exports to 1.13 million tons.

Meanwhile, May CPO futures were trading at RM4,453 per ton at midday on Bursa Malaysia Derivatives. (T2)