West Asian conflict and expectations for Indonesia's B50 support high CPO prices; Nomura expects roughly MYR4,700/MT in the near term

Overview

This report focuses on ASEAN palm oil and related agricultural stocks, with the core view that crude palm oil prices will remain elevated in the short term. The report attributes the CPO price increase to strong Malaysian exports, a weaker MYR versus USD, higher crude oil prices driven by the West Asian conflict, and incremental demand from potential biofuel policy tightening.

Core views

Nomura expects CPO prices to stay around MYR4,700/MT through 2026-04-09; if tensions in the Middle East/West Asia ease and crude oil declines, CPO could fall below MYR4,600/MT. If Indonesia's B50 is implemented, it would materially reshape the palm oil supply-demand balance, as higher domestic consumption would squeeze export supply. Lower Malaysian inventories and the sharp increase in March exports are short-term supports, but high prices could soften April export demand. Among substitute oils, lower-than-expected U.S. soybean acreage and weaker Ukrainian sunflower oil production are positive for edible oil prices, while improving Argentine soybean crop conditions could be a partial negative.

Analysis framework

The report uses a combination of event-driven and supply-demand balance analysis, tracking variables such as crude oil prices, the West Asian conflict, Indonesia's biofuel policy, Malaysian inventories and exports, India's vegetable oil demand, U.S. and Argentine soybean supply, and Ukrainian sunflower oil supply, and infers price transmission through substitution relationships among palm oil, soybean oil, and sunflower oil.

Methodology notes

• Supply and demand analysisPalm oil inventory and export tracking

  Falling inventories and strong exports support prices

  The report compares changes in Malaysian inventories, production, and exports, and concludes that inventories are lower than expected mainly because exports were stronger than expected, which is an important factor supporting elevated CPO prices in the short term.

• Policy event analysisBiofuel blending policy shock

  Indonesia's B50 raises domestic palm oil absorption

  If Indonesia implements B50, the report estimates that it could absorb an additional about 4mn MT of palm oil per year, which would reduce export availability and push prices higher against a backdrop of stagnant production.

• Cross-commodity analysisEdible oil substitution relationships

  Soybean oil and sunflower oil prices affect CPO

  The report argues that palm oil and soybean oil have historically been highly correlated, and that supply or cost changes in substitute oils affect CPO through relative price spreads and substitution demand.

• Valuation methodologyP/E and sum-of-the-parts valuation

  Stock targets are based on PER or SOTP

  In the appendix, IOI, Kuala Lumpur Kepong, and Triputra Agro Persada use FY26F or FY25F P/E multiples, while Wilmar uses sum-of-the-parts valuation with a 20% conglomerate discount.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Crude palm oil (CPO)

  Core research asset

  Strengths

  Falling inventories, strong exports, higher crude oil prices, and rising biofuel demand all support prices.

  Weaknesses

  High prices may curb export demand, and easing geopolitical tensions would weaken crude oil and biofuel support.

  Comparison

  It still trades at a discount to soybean oil and sunflower oil, so the impact on India demand may be smaller.

  Risks

  Easing tensions in the Middle East/West Asia, lower crude oil prices, weaker Malaysian exports, and improving substitute oil supply.

• Indonesia palm oil supply

  A policy-driven supply contraction factor

  Strengths

  The B50 policy could raise domestic consumption and absorb an additional about 4mn MT of palm oil.

  Weaknesses

  Policy implementation requires infrastructure and cost-bearing capacity support, and the government previously planned to maintain a 40% blending ratio.

  Comparison

  Compared with other exporters, Indonesia's policy has a more direct effect on global export availability.

  Risks

  Policy delays, cost pressure, and slower-than-expected implementation.

• Malaysian palm oil exports and inventories

  A short-term price signal

  Strengths

  March exports rose sharply month on month, and inventories are expected to fall to 2.19mn MT.

  Weaknesses

  The report expects April exports to fall 10%-15% month on month, and high prices may weaken demand.

  Comparison

  Malaysian export data is an important high-frequency indicator of global buying strength.

  Risks

  Export slowdown, faster-than-expected production recovery, and inventory rebuilding.

• Soybean oil

  A substitute oil and price-linked asset

  Strengths

  Lower-than-expected U.S. soybean acreage, higher input costs, and stronger biofuel demand all support soybean oil.

  Weaknesses

  Improving crop conditions in Argentina could weigh on soybean oil prices if production exceeds expectations.

  Comparison

  The report notes that palm oil and soybean oil are historically highly correlated, and stronger soybean oil typically supports CPO.

  Risks

  Improved South American soybean supply, weaker-than-expected demand, and lower energy prices.

• Sunflower oil

  A substitute oil supply disruption

  Strengths

  Ukraine's MY2025/26 sunflower oil output is expected to fall 10%, which could lift sunflower oil and other edible oil prices.

  Weaknesses

  High prices may dampen some demand.

  Comparison

  Ukraine contributes more than 30% of global sunflower oil exports, so its output decline has a large impact on the substitute oil system.

  Risks

  Better-than-expected actual output, easing export restrictions, and substitution demand shifting to other oils.

• Palm oil-related stocks

  Affected by both CPO prices and costs

  Strengths

  High CPO prices usually support plantation revenue and earnings expectations.

  Weaknesses

  Wages, fertilizer costs, and labor shortages may raise production costs.

  Comparison

  The appendix stocks use PER or SOTP valuation, and ratings and target prices are not fully consistent.

  Risks

  CPO prices below expectations, production costs above expectations, foreign labor shortages in Malaysia, certification delays, or regional economic weakness.

Key data

• CPO spot priceMYR4,741/MTUp about 5% over the week ended 2026-04-02.
• Nomura short-term CPO price expectationAbout MYR4,700/MTExpected to remain around this level through 2026-04-09.
• Downside scenario priceBelow MYR4,600/MTCPO could fall below this level if tensions in the Middle East/West Asia ease and crude oil prices decline.
• Indonesia B50 implementation date2026-07-01Indonesia's Coordinating Minister for Economic Affairs said B50 will be implemented from this date.
• Potential palm oil absorption under Indonesia B50About 4mn MT/yearThe report believes this would materially affect supply and demand and reduce export availability.
• Malaysian palm oil inventory expectation2.19mn MTBloomberg survey shows a 19% month-on-month decline in February, the largest monthly drop in three years.
• Malaysia March production expectation1.34mn MTUp 4.7% month on month, the first monthly increase since October 2025.
• Malaysia March export expectation1.55mn MTUp 37.2% month on month; Intertek separately reported March exports up about 44% month on month.
• Nomura April Malaysia export expectationAbout 1.40mn MTExpected to decline 10%-15% month on month.
• India March vegetable oil imports1.2mn MTBelow 1.32mn MT in February, affected by weaker demand and higher costs.
• U.S. soybean planting intentions84.7mn acresUp 4% year on year, but below analysts' expectation of 85.5mn acres.
• Argentine soybean production forecast48.5mn MTRainfall improved crop conditions, and the good-to-excellent rating rose from 38% to 45%.
• Ukraine MY2025/26 sunflower oil production forecast4.6mn tonnesOutput is expected to fall 10%, while exports are expected to decline 6.4% to 4.4mn tonnes.

Impact & implications

In terms of investment implications, the report is positive on CPO and the upstream palm plantation chain, especially when Indonesia's B50, high crude oil prices, and low Malaysian inventories are all present, as price elasticity may strengthen. Conversely, if tensions in the West Asia/Middle East ease, crude oil pulls back, Malaysian exports weaken because of high prices, or Argentine soybean supply improves more than expected, edible oil prices may come under pressure.

Risks

• Easing tensions in the Middle East/West Asia could pull crude oil prices lower, weakening support for biofuels and CPO prices.
• High CPO prices may suppress export demand, and Nomura already expects Malaysia exports to decline 10%-15% month on month in April.
• Improvement in Argentine soybean crop conditions could lower edible oil prices if soybean and soybean oil output exceeds expectations.
• Indonesia's B50 policy faces uncertainty around implementation pace, infrastructure, and cost assessment.
• Palm oil-related companies face downside risks from CPO prices below expectations, wage and fertilizer costs above expectations, and foreign labor shortages.
• Weaker food-service demand in India due to fuel shortages may weigh on some vegetable oil import demand.

What to watch

• Whether CPO remains around MYR4,700/MT through 2026-04-09.
• Whether Indonesia implements B50 on schedule on 2026-07-01, and how the actual blending execution and fiscal cost arrangements proceed.
• Malaysian MPOB inventory, production, and export data, especially whether April exports decline as expected.
• Changes in tensions in the West Asia/Middle East, crude oil prices, and the MYR/USD exchange rate.
• India's vegetable oil import demand and the price spread between palm oil and soybean oil/sunflower oil.
• U.S. soybean planting progress, Argentine harvest conditions, and changes in Ukrainian sunflower oil production and exports.