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Markets

Palm bounces back as floods raise output concerns

  • Palm climbs 2% after falling to over 2-month low.
  • Market anticipates lower production due to floods.
Published January 21, 2021

KUALA LUMPUR: Malaysian palm oil futures rose nearly 2% on Thursday, rebounding from a near 2-1/2-month closing low hit in the previous session, as heavy rains and floods in the top two producing countries stoked supply concerns.

The benchmark palm oil contract for April delivery on the Bursa Malaysia Derivatives Exchange gained 62 ringgit, or 1.9%, to 3,283 ringgit ($814.64) a tonne by the midday break.

"Crude palm oil futures snapped two days of steep losses on bargain buying and higher soybean oil close on the Chicago Board of Trade, but mixed Dalian and firmer ringgit were capping gains," said Sathia Varqa, co-founder of Singapore-based Palm Oil Analytics.

Palm oil fell 3.9% in the previous two sessions, settling at its lowest level since Nov. 9 on Wednesday, on worries over declining exports.

Upcoming industry data that is likely to show a fall in production will help sustain prices, Varqa added.

Output in parts of top producers Malaysia and Indonesia has been disrupted as heavy floods and rainfalls delay harvest and crop evacuation.

Exports of Malaysian palm oil products during Jan. 1-20 plummeted between 41% and 43% from a month earlier, as biggest buyer India curbed purchases, cargo surveyors said on Wednesday.

Dalian's most-active soyoil contract gained 0.5%, while its palm oil contract fell 0.1%. Soyoil prices on the Chicago Board of Trade were up 0.5%, adding to Wednesday's 2% jump.

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

Palm oil may rise to a range of 3,300 ringgit to 3,348 ringgit per tonne, as the fall from the Jan. 6 high of 3,888 ringgit may have completed, Reuters technical analyst Wang Tao said.

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