Jakarta. Palm oil issuers are expected to enjoy a good year in 2026, according to analysts, amid a likely uptrend in production and prices.

"The Indonesian palm oil industry for 2026 shows a positive outlook despite facing a number of global and domestic challenges," Maximilianus Nico Demus, associate director of Research and Investment at Pilarmas Investindo Sekuritas, said on Thursday.

The Indonesian Palm Oil Producers Association (Gapki) said that global demand for palm oil would remain relatively strong, particularly in Asia, the Middle East, and Africa. However, the EU Anti-Deforestation Regulation (EUDR) remains a challenge.

Indonesia, as the world's largest supplier of crude palm oil (CPO), is projected to increase production in 2025–2026 as the country continues its replanting.

"We estimate that total palm oil production [including CPO and palm kernel oil [PKO]], which declined in 2024, will increase by around 10% in 2025 and another 4–5% in 2026, driven by improved crop productivity and favorable weather conditions," Nico Demus said.

Global CPO prices are projected to remain at historically high levels in 2026, ranging from US$1,050–1,150 per ton. However, price volatility will remain, depending on biofuel policies, weather conditions, and global economic conditions.

Indonesia’s mandatory palm oil biodiesel program is expected to increase domestic CPO absorption. This helps support CPO prices as it slashes the available export volumes.

Pilarmas Sekuritas assesses that the mandatory 50% biodiesel (B50) target, or diesel fuel containing 50% palm oil, in the second half of 2026, will trigger a surge in global CPO prices. This will affect the price of fresh fruit bunches for farmers. Challenges that are likely to affect the industry include global sustainability regulations, complex domestic governance, and increased demands for traceability in the supply chain. This leads to the need to strengthen sustainability certifications and implement digital technology for tracking.

"The potential for solid CPO growth with prices remains strong, but industry players are advised to increase efficiency, accelerate replanting, and strengthen governance to maintain Indonesia's competitiveness in the global market," Nico Demus said.

Stock Prospects
Pilarmas Sekuritas believes that palm oil issuers' stocks still have significant room for growth in 2026. The securities company recommends four palm oil stocks worth watching: AALI, LSIP, BWPT, and GZCO, all of which have grown throughout 2025.

Shares of Astra Agro Lestari Tbk (AALI) rose 17.74% from the beginning of the year to Dec. 24 (year to date/ytd) to Rp 7,300 ($0.44). London Sumatra Indonesia (LSIP) saw a 21.54% year-to-date rise to Rp 1,185. Stocks of Gozco Plantations (GZCO) soared 124.78% to Rp 254. Eagle High Plantations (BWPT) also recorded 137.29% growth to Rp 140.

According to Pilarmas Sekuritas, AALI shares will reach Rp 8,252 in 2026, or up 13.04% from the last trading closing position of Rp 7,300. Followed by LSIP shares at Rp 1,653, with a potential increase of 39.49%. BWPT shares are set to reach Rp 150 with a potential increase of 7.14%. GZCO shares are likely to stand at Rp300, with a potential increase of 18.11% from the current position of Rp 254.

Dorab Mistry, the director of Godrej International, said global CPO prices would remain bullish next year. In the first quarter of 2026, palm oil futures prices are set to reach RM 5,500 (around $1,360) per ton following Indonesia’s plantation control measures and biodiesel initiatives. Other factors that affect global prices include inadequate supply and the La Niña phenomenon.

Malaysian Futures Exchange of palm oil futures for October-November 2025 is under pressure. The market appears oversold, and investors are exiting the market. The decline may continue until production actually declines. Amidst weakening production, prices will move towards RM 5,000 per ton by the end of December.

"Why is there a bullish scenario? Because oilseed prices are unattractive, farmers worldwide are unhappy, and oilseed cultivation is stagnant, except for soybeans. Palm oil production is stagnant, and productivity is declining, but biodiesel production is increasing," Dorab said.

By 2026, Indonesian palm oil production will increase by 1.5 million tons. Indonesia currently mandates a palm oil-based biodiesel at a 40 percent blend as part of a policy better known as the B40. The number corresponds to how much palm oil is within the biodiesel. The tests for the B50 biodiesel have already begun.