Palm oil stocks hit decade high as exports gain momentum

 

MPOB July 2026 output of 1.793 mil MT (+9% quarter-on-quarter) took 7-month YTD production to 10.816 mil MT, being 0.4% firmer year-on-year (YoY) and 5% above 10-year average. 

July exports rose to 1.392m MT (+15% month-on-month)(MoM) but continued to trail output thus July closing inventory was another new 10-year high, at 2.628m MT, 4% above Kenanga but within 1% of consensus estimates. 

In spite of the stronger exports, July crude palm oil (CPO) price held firm at RM4,493 per MT (+0.1% MoM). 

With higher bio-diesel demand as well as risks of a very strong El Nino, edible oil prices including palm oil are likely to stay elevated into the second half of calendar year 2026 (2HCY26) and CY27. 

Kenanga maintains 2026 CPO price of RM4,400 per MT and RM4,450 in 2027 and stays Overweight on the sector.

The year 2025 was a record year for Malaysian palm oil production. The momentum continued until Feb 2026. 

Since then, monthly production has slipped on a (YoY) basis. However, on a cumulative basis, year-to-date production of 10.816 mil MT for 2026 was still a tad above the first seven months of cumulative production in 2025, by just 0.2% higher YoY. 

As such, 2026 FFB production is expected to come in 1-2% lower than last year’s 20.28 mil MT on weaker yield and risk of an early impact of a very strong El Nino.

Unlike yields where the impact on palm oil is more noticeable when a very strong El Nino occurs, CPO prices can be more reactive, rising even under a moderate or strong El Nino. 

Even more reactive still is PK prices. If CPO prices can rise between 10-30% under moderate, strong or very strong scenarios for El Nino, while PK prices can rise by 20-45% based on previous El Nino occurrences. 

The reason is PKO has only one major rival, coconut whereas CPO competes with oil crops such as soyabean, rapeseed, sunflower, olive and even butter and animal fats. 

Consequently, better upstream revenue and margins can be expected between the second half of 2026 and the first half of 2027.— Focus Malaysia