RHB raises CPO prices forecast on strong El Nino - The Edge Malaysia
RHB raises CPO prices forecast on strong El Nino The Edge Malaysia
Source: The Edge Malaysia · July 31, 2026 at 3:02 AM · AI-assisted report
KUALA LUMPUR, 31 JULY 2026 —
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KUALA LUMPUR (July 30): RHB Research has raised its forecasts for crude palm oil (CPO) prices for 2027 and 2028, citing the high likelihood of a strong El Niño event late this year. The research house noted that most weather models project a very strong El Niño event to occur in 2026, with the strongest effects expected from October onwards. As a result, RHB has increased its CPO price assumptions for 2027 and 2028 to RM4,500 and RM4,400 per tonne, respectively, from RM4,300 previously.
Market Impact
The El Niño phenomenon, which typically brings drier weather, is expected to reduce palm oil production and boost prices. Historically, El Niño events have had a significant impact on CPO prices, with previous events resulting in price increases due to reduced production. The last strong El Niño event occurred in 2015-2016, which led to a significant decline in palm oil production and a subsequent increase in prices. Details of the current El Niño event's potential impact on production levels are not yet available, but RHB's forecast suggests that prices are likely to remain elevated in the coming years.
RHB's revised forecast is based on the expected impact of the El Niño event on CPO production. While the research house has raised its price assumptions, it remains conservative due to the uncertainty surrounding the strength of the El Niño event. The house will incorporate the new price assumptions into its forecasts, as well as the impact of changes to its environmental, social, and governance (ESG) scores, in the upcoming results season. Current CPO prices are at RM4,600-4,700 per tonne, and RHB has maintained its assumption for 2026 at RM4,400 per tonne.
The revised forecast is likely to have a positive impact on the Malaysian palm oil sector, with RHB maintaining its "overweight" stance on the sector. The research house's top picks include Johor Plantations Group Bhd, Sarawak Oil Palms Bhd, IOI Corp Bhd, Hap Seng Consolidated Bhd, and SD Guthrie. These companies are expected to benefit from the anticipated price increase, although the main downside risks include the extension of the US-Iran war, weather abnormalities, and changes in the crude oil price trend. RHB's annual ESG review has resulted in an improving sustainability profile across the sector, with the score increasing from 2.7 to 2.8 out of 4.0.
The Malaysian palm oil sector is a significant contributor to the country's economy, and the revised forecast is likely to have a positive impact on the sector's performance. The sector's valuations are still considered undervalued by RHB, which supports the research house's "overweight" stance. The top picks are expected to outperform the sector, driven by their strong fundamentals and the anticipated price increase. Details of the companies' specific plans to mitigate the impact of the El Niño event are not yet available, but RHB's forecast suggests that they are well-positioned to benefit from the expected price increase.
Looking ahead, RHB's revised forecast suggests that CPO prices are likely to remain elevated in the coming years, driven by the expected impact of the El Niño event. The research house's "overweight" stance on the sector and its top picks are expected to benefit from the anticipated price increase. However, the main downside risks, including the extension of the US-Iran war and changes in the crude oil price trend, could impact the sector's performance. RHB's annual ESG review has resulted in an improving sustainability profile across the sector, which is expected to support the sector's long-term performance. As the El Niño event unfolds, RHB will continue to monitor the situation and update its forecast accordingly.
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