Palm oil falls for second day on lockdown demand concerns

KUALA LUMPUR: Malaysian palm oil futures fell for a second straight day on Tuesday, as a two-week lockdown threatened to hit domestic consumption of the edible oil amid a sluggish export pace in May, but expectations of lower production limited losses.

The benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange closed lower 30 ringgit, or 0.77%, to 3,889 ringgit ($942.79) a tonne.

The contract rose 1.3% last month.

Malaysia starts a two-week nationwide lockdown on Tuesday. Essential manufacturing and service sectors, including the palm oil supply chain, are allowed to operate but the closure of most businesses is likely to affect local palm oil consumption.

Exports of Malaysian palm oil products for May rose 1.5% from April, cargo surveyor Intertek Testing Services said on Monday.

The export pace has slowed down considerably from the first half of May and now production estimates will be key to guide end-May palm oil inventories, said Anilkumar Bagani, research head of Mumbai-based vegetable oils broker Sunvin Group.

"Market is likely to be more volatile ahead of Malaysia's full May production estimates and previews for Malaysian Palm Oil Board's May supply and demand numbers," Bagani said.

The Southern Peninsula Palm Oil Millers' Association estimated production in May to decline 3.7% from the previous month, traders said.

India raised the base import price of palm oil, soybean oil, gold and silver, the government said.

Dalian's most-active soyoil contract gained 1%, while its palm oil contract also gained 0.1%. Soyoil prices on the Chicago Board of Trade were up 0.4%.

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