Thus far, RHB notes that spot CPO prices have moderated from RM4,600-RM4,800/tonne in 1Q2025 to a low of RM3,780 in May, only to bounce back to RM3,900-RM4,100 currently. The decline was mainly driven by geopolitics in the light of US trade tariffs, wars and crude oil prices falling as a result, all of which pushed CPO prices in the same direction.
"We highlight that the correlation between CPO prices and crude oil prices surged to 0.47 in Apr 2025 from -0.6 in 1Q2025, and subsequently rose further to the current levels of 0.68, due to more geopolitical risks," says RHB.
On the outlook, RHB expects CPO prices to remain volatile given the ever-changing geopolitical situation. Fundamentally however, global supply and demand will likely be more balanced in 2026, as supply improves, while demand should pick up given the more attractive relative prices, the firm believes.
Meanwhile, supply of 17 oils and fats complex is expected to improve y-o-y in FY2026, coming from a partial recovery of palm, sunflower and rapeseed supplies, as well as continued growth from soybeans. Still, the stock/usage ratio ofthe 17 oils and fats complex is still expected to remain below the historical average of 13.6%, at 12.9% for Oct 2025/Sep 2026, albeit up from 12.7% in FY2025.
See also: CGSI resumes coverage with ‘add’ on China Yuchai with raised target price of US$39.50 from US$13.20
"This leaves very little cushion in case of any short-term bullish supply or demand surprises, hence raising the risk of price volatility going forward," according to RHB.
Hence, RHB has trimmed CPO prices to RM4,100/tonne (from RM4,300) for 2025 and to RM4,000 (from RM4,100) for 2026 and 2027; but raise PK prices to RM3,300/tonne for 2025 (from RM2,800) and to RM3,200 for 2026 and 2027 (from RM2,600). "We also update for our latest in-house forex assumptions and adjust forecasts by 3.2%, -1.2% and -1.3% for FY2025-FY2027," says RHB.
As at 10.35am, shares in First Resourches are trading at $1.49.
