KUALA LUMPUR: Malaysian palm oil futures ended at a two-week high on Thursday, following a rally in global agricultural markets due to worries over weather in the United States, and on news that top edible oil buyer India may cut import taxes to lower local prices.
The benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange closed up 58 ringgit, or 1.42%, at 4,150 ringgit ($1,007.28) a tonne. The contract gained as much as 4.1% to hit its highest since May 20 earlier in the day.
Palm oil prices have declined about 6% since hitting record highs on May 12.
“The lower reversal has led to demand opportunities in Q4 2021 and Q1 2022 due to improved import and processing margins at China and India,” said Marcello Cultrera, institutional sales manager & broker at Phillip Futures in Kuala Lumpur.
At the same time, soyaoil prices were supportive as they were bid higher on the weather risk premium, he added.
“Yet, at current levels, the June and July demand is muted given supply is rising moving forward,” Cultrera said.
Hot and dry weather in parts of the US Midwest is causing concerns over yields of newly planted corn and soyabean crops, following a severe drought in Brazil.
World’s biggest edible oil importer India is considering reducing import taxes on edible oils after cooking oil prices hit record highs last month, Reuters reported.
The tax reduction could lower local prices and boost consumption, giving support to palm oil, along with soya and sunflower oil.
China’s edible oils futures jumped on the news and worries over tightening supplies of soyaoil.
Dalian’s most-active soyaoil contract rose 4.4%, while its palm oil contract gained 6%. Rapeseed oil futures on the Zhengzhou Commodity Exchange rose 3%. Soyaoil prices on the Chicago Board of Trade were up 1.9%, hitting a 10-year high.
Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.
Indonesia’s consumption of biodiesel fell 8.2% in the first four months of 2021 compared to the same period last year, as transportation demand remained muted due to the pandemic.
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