Palm jumps to more than 3-year high as supply outlook dims

• Palm is affected by price movements in related oils as they compete for share in the global vegetable oils market.
• A Malaysian government official said on Tuesday that it will implement its B20 biodiesel programme by 2020.
• A 4pc jump in palm oil to a record-high on the Dalian Commodities Exchange also added to the surge.

SINGAPORE: Malaysian palm oil futures rose 2.5pc and touched their highest price in more than three years on Wednesday, as supply outlook for the edible oil in 2020, dimmed and prices of rival oils surged.

The benchmark palm oil contract on the Bursa Malaysia Derivatives Exchange was up for the third straight session and closed at 2,687 ringgit ($645.29) per tonne.

It reached as high as 2,699 ringgit earlier in the session, the highest since Oct. 13, 2017.

The contract jumped on the back of a tighter palm oil supply outlook, which could lead to supply deficit and higher prices, prominent industry analyst James Fry said earlier on Wednesday.

A 4pc jump in palm oil to a record-high on the Dalian Commodities Exchange also added to the surge.

Dalian's January palm oil contract reached as much as 5,626 yuan ($800.03) per tonne during the session, the highest price since the contract first traded.

Dalian's palm oil contract likely rose "following tightness in palm oil supply in 2020 amid B30 and B20 mandates in Indonesia and Malaysia, respectively," Anilkumar Bagani, research head of Sunvin Group, a Mumbai-based vegetable oil broker, told Reuters.

Bagani was referring to plans by Malaysia to require fuel to have 20pc bio-content in the form of palm oil and 30pc in Indonesia.

A Malaysian government official said on Tuesday that it will implement its B20 biodiesel programme by 2020.

Meanwhile, Dalian's soyoil contract rose 1.5pc, while soyoil on the Chicago Board of Trade rose 1.4pc.

Palm is affected by price movements in related oils as they compete for share in the global vegetable oils market.

A weaker ringgit, which was 0.2pc lower against the dollar on Wednesday, also helped prices, making palm oil cheaper for holders of foreign currencies.