Palm reverses early losses on lower Indonesia production

KUALA LUMPUR: Malaysian palm oil futures reversed early losses on Wednesday, snapping a three-day losing streak, boosted by lower production in the world's biggest producer Indonesia during the first half of the year.

The benchmark palm oil contract for October delivery on the Bursa Malaysia Derivatives Exchange closed up 40 ringgit, or 1.51pc, at 2,683 ringgit ($640.33) a tonne.

Indonesia palm oil exports and production both fell in the first half of the year due to drier weather and lower demand brought about by the COVID-19 pandemic, the Indonesian Palm Oil Association (GAPKI) said.

Output in the world's biggest producer of palm oil fell 8.9pc to 23.5 million tonnes for the January-June period.

The contract had fallen as much as 1.4pc, a two-week low, during early trade on expectations Malaysia's August output would rise, as the second biggest producer nears the peak production season that typically starts in September.

Marcello Cultrera, institutional sales manager and broker at Phillip Futures in Kuala Lumpur, said palm oil futures were also impacted by the closing of long positions on Dalian edible oils and rapeseed oil futures at the Zhengzhou Commodity Exchange.

Chinese funds and speculators are leading the sale due to expectations of stronger soybean demand and as edible oil contracts reach physical delivery period, Cultrera said.

Dalian's most-active soyoil contract fell 1.45pc, while its palm oil contract dropped 2.56pc. Soyoil prices on the Chicago Board of Trade were up 0.39pc.

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