Palm drops 1% on virus-led demand worries, cheaper soyoil

KUALA LUMPUR: Malaysian palm oil futures fell 1% on Monday, pressured by lower competing Chicago soyoil and demand concerns due to a surge in COVID-19 cases in India and other countries.

The benchmark palm oil contract for July delivery on the Bursa Malaysia Derivatives Exchange slid 40 ringgit, or 1.08%, to 3,676 ringgit ($890.50) a tonne by the midday break.

Palm oil has failed to attract fresh buying from destination countries due to high prices and concerns that rising COVID-19 cases in biggest buyer India may cause a setback to demand, said Anilkumar Bagani, research head of Mumbai-based vegetable oils broker Sunvin Group.

India's capital New Delhi on Sunday recorded 25,500 coronavirus cases in a 24-hour period, with about one in three people tested returning a positive result, raising concerns of more lockdown measures.

In Indonesia, the world's top palm oil producer, inventories at end-February is seen falling to 4.04 million tonnes, data from the Indonesia Palm Oil Association (GAPKI) showed on Friday.

"The market is estimating Indonesian palm oil production in March to increase by double digits, while exports is seen increasing multi-fold," Bagani said.

Investors also expect Indonesia to hike its palm oil export duty for May to $144 a tonne from $116 a tonne in April, after rival Malaysia raised its crude palm oil export duty reference price for next month, he added.

Dalian's most-active soyoil contract gained 0.5%, while its palm oil contract also rose 0.5%. Soyoil prices on the Chicago Board of Trade were down 0.3%.

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

Palm oil's July contract faces a resistance at 3,722 ringgit per tonne.

It may hover below this level or retreat to 3,654 ringgit, Reuters technical analyst Wang Tao said.