Palm oil on track for second day of gains on output concerns

KUALA LUMPUR: Malaysian palm oil futures on Thursday were poised for a second consecutive session of gains, on the back of output growth concerns although traders said the market was showing mixed signals on a stronger ringgit and weaker exports.

A stronger ringgit, palm's currency of trade, typically weakens the market as it makes palm oil more expensive for holders of foreign currencies. Earlier in the session, the currency rose 0.1 percent to 4.2530 against the dollar, its highest in over seven months.

The benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange was slightly up 0.1 percent at 2,458 ringgit ($577.94) a tonne at the midday break.

Traded volumes stood at 24,029 lots of 25 tonnes.

"We expected the market to be lower this morning amid a strong ringgit and weak exports, but the market seems to be holding," said a Kuala Lumpur-based trader.

"We believe the market could be anticipating harvest interruptions during Ramadan, which could offset the lower exports."

Palm oil production is seen falling in June as workers go on leave during the Muslim fasting month of Ramadan and the Eid-Al-Fitr holiday period, leading to a shortage of workers to harvest the oilseed.

Ramadan sees Muslims break day-long fasts with communal feasting, incurring higher palm oil usage for cooking purposes, while Eid marks the end of the fasting season.

Palm oil exports are expected to decline after Ramadan, and as big buyers such as China and India switch to cheaper rival oilseeds such as soyoil and rapeseed oil. Shipments from Malaysia fell 17.6 percent in the first half of June compared with the corresponding period last month, according to Intertek Testing Services cargo surveyor data.

In other related oils, soybean oil on the Chicago Board of Trade was down 0.1 percent. Movements in the soyoil market generally affect palm oil prices as both vegetable oils compete for a share in the global edible oils market.