KUALA LUMPUR: Malaysian palm oil futures dropped more than 3% on Thursday, hitting their lowest closing in over six months after Indonesia allowed more of its products to enter the global market.
The benchmark palm oil contract for July delivery on the Bursa Malaysia Derivatives Exchange closed down 115 ringgit, or 3.22%, to 3,455 ringgit ($774.66) a tonne, its lowest closing since Oct. 3.
The vegetable oil ended lower for a fifth straight session, its longest losing streak in a month.
Policy changes from Indonesia have resulted in a choppy move in the market, a Kuala Lumpur-based trader said.
The world’s top producer will lower its mandatory domestic sales threshold for palm oil producers to 300,000 tonnes a month starting in May, the Trade Ministry said, allowing more shipments of the widely used oil to leave the country.
From May, the government will tighten the ratio of palm oil exports to four times the volume producers have sold domestically, from six times the volume currently, but ease the ratio for some cooking oil products.
The Indonesian government is trying to encourage more exports since it lowered the domestic sales, which should be viewed as bearish, the trader said.
Concerns over slow exports as palm oil remains uncompetitive against soy oil, and anticipation of production pick-up also dampened sentiment, the trader added.
Dalian’s most-active soyoil contract fell 0.7%, while its palm oil contract eased 1.9%. Soyoil prices on the Chicago Board of Trade were down 1.5%.
Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oil market.
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