Palm oil climbs, Malaysia restrictions stoke supply concerns

• The benchmark palm oil contract for June delivery on the Bursa Malaysia Derivatives Exchange closed up 26 ringgit, or 1.17%, at 2,246 ringgit ($516.56) a tonne.

KUALA LUMPUR: Malaysian palm oil futures rose on Tuesday on supply concerns  after the world's second-largest producer ordered two weeks of restricted movement that requires most businesses to shut down in an effort to contain the coronavirus outbreak.

The benchmark palm oil contract for June delivery on the Bursa Malaysia Derivatives Exchange closed up 26 ringgit, or 1.17%, at 2,246 ringgit ($516.56) a tonne.

Malaysia will shut its borders to travellers, restrict internal movement, close schools and universities, and order most businesses to shut from March 18-31 after its number of coronavirus cases climbed to the highest in Southeast Asia.

Malaysia's palm oil plantations must be allowed to operate during the two weeks of restricted movements as it would be damaging to the industry if they were to shut down, the Malaysian Palm Oil Association told Reuters on Tuesday.

Palm oil prices climbed as much as 5% during the session on fears that a stop in harvesting and milling would tighten already low inventories.

"A halt in harvesting activity will rot and perish fresh fruit bunches, leading to zero milling activity and a sap in crude palm oil output, which in turn will stall refinery activities," said Sathia Varqa, owner and co-founder of Singapore-based Palm Oil Analytics.

A weaker ringgit and potentially lower output propped up palm prices on Tuesday and any hint of exemption from the restrictive order will also be seen as good news, Varqa said.

The ringgit, palm's currency of trade, fell 0.95% against the dollar, making the edible oil cheaper for holders of foreign currency.

The only factor holding palm prices from jumping higher is the plunge in crude oil prices, said Marcello Cultrera, institutional sales manager at Phillip Futures in Kuala Lumpur.

Palm fell 2.8% in the previous session and has been trading at October levels following a three-month slump on demand concerns as the virus escalated globally and oil prices fell below $30 per barrel.

Weak crude oil futures make palm a less attractive option for biodiesel feedstock.

Dalian's most-active soyoil contract fell 0.42%, and its palm oil contract gained 1.6%. Soyoil prices on the Chicago Board of Trade rose 1.84%.

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