Malaysian palm oil futures bounced back on Friday after two days of losses as market focus shifted to a major industry report due early next week, which is forecast to show a decline in production. The benchmark palm oil contract for March on the Bursa Malaysia Derivatives Exchange gained 0.5 percent to 2,433 ringgit ($556.11) per tonne. Traded volume stood at 25,818 lots of 25 tonnes each at the close of trade.
Palm declined for three out of five sessions this week due to weak export demand, a narrowing discount to rival soyoil prices and weakness across financial markets triggered by plunging Chinese markets and a weakening of the yuan currency. Palm hit a low of 2,418 ringgit on Thursday, its lowest level since December 18. Despite the negative factors, which also include a strengthening ringgit, an expected fall in output should lend support to palm prices, said a trader in Kuala Lumpur. "Most traders are anticipating a bullish to neutral report on Monday from the Malaysian Palm Oil Board, thus the short covering ahead of the report," he said.
"It's a weather market still," said another trader, referring to dryness caused by the El Nino weather pattern, which lowers palm fruit yields. Government body MPOB is set to release its palm oil data for the month of December on January 11 after 0430 GMT. Output is likely to have dropped to 1.36 million tonnes, down 17.8 percent from November and the lowest since February 2015, a Reuters poll showed. Palm stocks in the world's No 2 producer are seen falling nearly 18 percent to 1.36 million tonnes in December from a record high in November, according to the poll. The survey also forecast a 6.6 percent drop in December exports on slowing demand from China and Europe. The US March soyoil contract rose 0.3 percent, while the May soybean oil contract on the Dalian Commodity Exchange lost 0.1 percent.
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