Palm up 1.3pc on supply worries, coronavirus concerns cap gains

• The benchmark palm oil contract for April delivery on the Bursa Malaysia Derivatives Exchange rose to 2,687 ringgit a tonne.
• Palm oil is generally affected by price movements in related oils as its competes for a share in the global vegetable oil market.
• Palm oil and soyoil on the Dalian Commodity Exchange reversed earlier gains and saw its second consecutive session of losses as the coronavirus outbreak weighed on prices.

JAKARTA: Malaysian palm oil futures rose on Tuesday for a second consecutive day, despite concerns over a virus outbreak in China as prospects of lower production and gains in soyoil on the Chicago Board of Trade buoyed prices.

The benchmark palm oil contract for April delivery on the Bursa Malaysia Derivatives Exchange rose to 2,687 ringgit a tonne, highest since Thursday, before pulling back on demand worries.

The contract was last trading about 1.3pc higher at 2,635 ringgit ($640.34) per tonne.

Prices remained firm as palm oil production is expected to have declined in January, a Kuala Lumpur-based trader said.

"Production is expected to fall within the range of 4pc to 17pc, and even up to 22pc," the trader told Reuters.

Dry weather and lower fertiliser use reduced output last year and are likely to lead to lower production this year. Growers have been using less fertiliser to help cut costs.

Further supporting prices was costlier soyoil on the Chicago Board of Trade which last rose 0.6pc.

Palm oil is generally affected by price movements in related oils as its competes for a share in the global vegetable oil market.

Palm oil and soyoil on the Dalian Commodity Exchange reversed earlier gains and saw its second consecutive session of losses as the coronavirus outbreak weighed on prices.

Dalian palm oil last fell 1pc while soyoil traded 0.3pc lower.

The epidemic has sickened thousands in China and killed more than 420.

The epidemic is expected to disrupt supply chains across many commodities and energy sectors.

The benchmark palm oil contract fell nearly 9pc last week on fears the virus outbreak would lower demand from China, the world's second-biggest buyer of the vegetable oil.

Palm oil is biased to break a support at 2,592 ringgit per tonne and fall into a range of 2,435-2,513 ringgit, Reuters analyst, Wang Tao said.