Palm oil loses ground on falling exports to India, China

• The benchmark palm oil contract for April delivery on the Bursa Malaysia Derivatives Exchange was down 15 ringgit.
• Palm oil had lost ground for two straight sessions, falling 2pc on Monday.
• Malaysia's palm oil end-January inventories fell 12.7pc to 1.76 million tonnes from the previous month.

KUALA LUMPUR: Malaysian palm oil futures erased early gains to trade lower on Tuesday, weighed down by weak demand from top buyers, India and China, and expectations of higher production in February.

The benchmark palm oil contract for April delivery on the Bursa Malaysia Derivatives Exchange was down 15 ringgit, or 0.54pc, to 2,739 ringgit ($661.75) per tonne during early trade.

Palm oil had lost ground for two straight sessions, falling 2pc on Monday.

"Demand worries is certainly re-emerging in the market," said Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari Sdn Bhd.

"We are also seeing an uptick in Feb. 2020 production," Paramalingam said, adding that better production and slackening demand has kept prices under pressure.

Data from industry regulator the Malaysian Palm Oil Board (MPOB) on Monday showed January exports saw a lower-than-expected fall of 13.2pc from December. Feb. 1-10 exports also fell between 20pc and 29.4pc, cargo surveyors Intertek Testing Services, Societe Generale de Surveillance and Amspec Agri Malaysia said.

Exports to top buyers India and China will remain subdued in February due to India's restriction on refined palm oil, the rising severity of a coronavirus outbreak in China and the winter season, said Kenanga Investment Bank, in a research note to clients. Palm oil buyers typically switch to soybean oil during the winter months.

Meanwhile, the death toll from the fast-spreading coronavirus in second largest buyer China has reached 1,016 as of Tuesday, surpassing the death toll from the 2002/2003 Severe Acute Respiratory Syndrome (SARS) epidemic.

Malaysia's palm oil end-January inventories fell 12.7pc to 1.76 million tonnes from the previous month, while production plunged 12.6pc to 1.17 million tonnes month-on-month, MPOB said on Monday.

Dalian's most-active soyoil contract fell 0.4pc, while its palm oil contract also traded 0.5pc lower. Soyoil prices on the Chicago Board of Trade gained 0.3pc.

Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oil market.