Palm gives up early gains as weak exports, rising production weigh

KUALA LUMPUR: Malaysian palm futures gave up early gains to close unchanged on Thursday, weighed down by estimates of higher production so far this month, lacklustre exports, and lower Indonesian export tax reference prices.

The benchmark palm oil contract for July delivery on the Bursa Malaysia Derivatives Exchange slipped 1 ringgit, or 0.02%, to 6,307 ringgit ($1,470.51) a tonne. Earlier in the session, it rose as much as 1.9%.

Exports from the world’s second-largest producer during April 1-20 fell between 14% and 18% from the same period a month earlier, cargo surveyors said on Wednesday.

This was in contrast to initial market expectations of strong shipments due to higher Indonesian export taxes, said Anilkumar Bagani, research head of Mumbai-based vegetable oils broker Sunvin Group.

Top producer Indonesia has set its May crude palm oil reference price at $1,657.39 a tonne, a senior official at coordinating ministry of economic affairs said, below April’s $1,787.5 per tonne.

The Southern Peninsula Palm Oil Millers’ Association estimated April 1-15 production rose 5.28% from the month before, a significant departure from the deep declines seen in the previous weeks, Bagani said. “The supportive factor remains soy oil prices in the US as well as in South America, and the prolonged Russia-Ukraine war, which is capping the Black Sea sunflower oil export, leaving palm oil as the main alternative to bridge the vegetable oils demand gap,” Bagani added.

Oil prices rose on concerns about supply as the European Union mulls a potential ban on Russian imports, making palm a more attractive option for biodiesel feedstock.

Dalian’s most-active soyoil contract rose 0.5%, while its palm oil contract fell 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.