KUALA LUMPUR: Malaysian palm oil futures ended nearly 2% higher on Wednesday, rising for a third straight session as forecasts for heavy rain due to a La Nina weather pattern and tighter coronavirus-induced curbs in key growing regions raised concerns over output.
The benchmark palm oil contract for December delivery on the Bursa Malaysia Derivatives Exchange closed up 54 ringgit, or 1.92%, at 2,872 ringgit ($691.22) a tonne, after rising 3.56% in the previous session.
Sathia Varqa, co-founder of Singapore-based Palm Oil Analytics, said a lower output forecast due to coronavirus curbs in the key producing state of Sabah and data suggesting slower output growth in peninsular Malaysia this month had lifted prices.
On Tuesday, Malaysia’s Prime Minister Muhyiddin Yassin said targeted lockdowns would be imposed in areas with high rates of coronavirus infections, including Sabah, as the country battles a sharp spike in cases.
The Malaysian Palm Oil Association (MPOA) estimated September production would rise 3.11% from the month before, traders said.
“MPOA production data released at the midday break is at the lower end of expectations, supporting the idea of a tight stock situation,” Varqa said.
A La Nina weather pattern is expected to bring high rainfall in top producers Indonesia and Malaysia in the coming months, Refinitiv Commodities Research said, potentially disrupting harvesting.
However in the longer term the impact on palm production is expected to be positive, it said, as wet weather in the two countries would sustain soil moisture levels and palm growth at healthy levels.
Soyaoil prices on the Chicago Board of Trade were up 0.3%. The Dalian Exchange was closed for a public holiday.
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