Malaysian palm oil recovers from early losses, set for best year in a decade

Malaysian palm oil futures cut early losses on Monday to trade little changed, heading for their best year in a decade amid expectations of lower output and an increased push for biofuel usage in the world's two top producers of the tropical oil.

The benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange fell as much as 0.7% on profit-taking before recovering to trade 1 ringgit, or 0.03%, lower at 3,072 ringgit ($747.26) by the midday break.

Palm prices have soared over 44% this year, heading for their biggest yearly gain since 2009. "Market is waiting for the full December production and export numbers, and India Palm oil duty changes in line with ASEAN agreement," said Anilkumar Bagani, research head of Sunvin Group, a Mumbai-based vegetable oil broker.

Palm oil rallied 5.5% last week, jumping above the 3,000 ringgit for the first time in nearly three years, after the Malaysian Palm Oil Association and the Southern Peninsular Palm Oil Millers Association forecast production in December to fall more than expected from a month earlier at 16% and 27%, respectively, traders said.

Yield is expected to be lower in the first half of 2020 due to poor rainfall and lower fertiliser usage in top producers Malaysia and Indonesia earlier this year, according to traders and analysts.

Exports of Malaysian palm oil products for Dec. 1-25 fell between 8.5% and 12.8% from a month earlier, according to cargo surveyors. However, domestic consumption is expected to increase as Malaysia and Indonesia are pushing for higher palm bio-content requirements in their 2020 bio-diesel programmes.

Indonesia is set to collect an up to $50 per tonne export levy on palm oil in January, the trade ministry said on Friday.

Gains in rival oils on the Dalian Commodity Exchange helped prices to recover. The most-active Dalian soyoil contract climbed 0.9%, while the palm oil contract rose 1.4%. Soyoil prices on the Chicago Board of Trade were trading 0.3% higher. Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.