Malaysia palm reverses gains to catch up with cheaper rivals

SINGAPORE: Malaysian palm oil reversed earlier gains on Friday, tracking cheaper rival oils, weighed by potential vegetable oil import cuts by top consumer India.

The benchmark palm oil contract for April delivery on the Bursa Malaysia Derivatives Exchange reversed two straight session of gains and traded 9 ringgit lower to 3,378 ringgit ($833.66) a tonne in early trade.

It had ended 3.7% higher on Wednesday. The market was closed for a holiday on Thursday.

"The market is playing catch-up with the externals markets after one day closure and some long weekend profit taking," a Kuala Lumpur-based trader told Reuters.

Soybeans futures on the Chicago Board of Trade closed down in technical trade on Thursday, despite concerns about tightening global supplies of grains and oilseeds.

Chicago soybean oil was last down 0.1%.

Dalian Commodity Exchange's most-active soyoil and palm oil contracts fell 0.1% and 0.2%, respectively.

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

Also hitting sentiment, Reuters reported late on Thursday that the top importer is likely to announce a five-year plan to cut expensive vegetable oil imports worth $10 billion a year in next week's federal budget by providing farmers with financial incentives to switch to oilseeds from grains.

Meanwhile, Indonesia set crude palm oil reference prices higher for February, increasing both export tax and levies.

However, the news from India and Indonesia is likely to make only a "minor impact".

"It's a 5-year plan for India's budget and the market already expected an Indonesian tariff hike," the trader said.

Palm oil may test a resistance at 3,426 ringgit per tonne, a break above which could lead to a gain to 3,474 ringgit, Reuters analyst Wang Tao said.