KUALA LUMPUR: Malaysian palm oil futures reversed early losses on Wednesday, reaching a five-week peak on concerns over slow output growth and anticipation of an uptick in export shipments.
The benchmark palm oil contract for September delivery on the Bursa Malaysia Derivatives Exchange settled up 44 ringgit, or 1.11%, to 4,021 ringgit ($957.85) a tonne, after falling 1.3% during the session.
Palm rose for a second straight day and closed at its highest since June 8.
Lack of manpower and coronavirus-led lockdown restrictions are taking a toll on output, said Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari.
Plantations in Malaysia are entering the seasonal higher production period, but analysts anticipate only a small rise in July output as labour shortage continues to hamper harvesting.
“This explains the lack of crude palm oil sellers in the physical market today,” he said, adding that prices were expected to remain steady despite intermittent profit-taking activities.
Traders now await July 1-15 export data from cargo surveyors, scheduled for Thursday. Market talks pegged exports to rise 3% month-on-month.
Indonesian crude palm oil exports jumped 21.6% in May compared to the same month a year ago on the back of stronger demand from Pakistan and countries in Africa and the Middle East, according to the Indonesian Palm Oil Association.
The ringgit, palm’s currency of trade, weakened 0.19% against the dollar, making the commodity cheaper for holders of foreign currency.
The ringgit is poised for more losses as record coronavirus infections, movement restrictions, a cut to Malaysia’s 2021 GDP forecast, political dysfunction and a broadly stronger US dollar take a toll, a Reuters market analyst said.
Dalian’s most-active soyaoil contract gained 1.4%, while its palm oil contract rose 1.4%. Soyaoil 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.