Malaysian palm oil eases

22 Jul, 2020

KUALA LUMPUR: Malaysian palm oil futures erased early gains and ended lower in volatile trade on Tuesday, as traders took profits after two days of sharp gains and as rival soyaoil prices weakened, while supply concerns limited losses.

The benchmark palm oil contract for October delivery on the Bursa Malaysia Derivatives Exchange closed down 0.79% to 2,640 ringgit per tonne. It had risen 1.16% earlier in the session, hovering at a five-month high hit on Monday.

The contract gained 8.4% last week.

Dalian's most-active soyaoil contract fell 0.35%, while its palm oil contract slipped 0.47%. Soyaoil prices on the Chicago Board of Trade were down 0.23%.

A rally in China's rapeseed oil futures is pushing its price spread with other edible oils to the widest in years, with lower imports of the oilseed from Canada and tightening supplies spurring trading interest and volumes.

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

"Supply worries are driving prices," said Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari Sdn Bhd.

July 1-20 production in Malaysia is showing a decline of about 5%, he said.

Heavy rains and flash flood in top producers Malaysia and Indonesia this month had fuelled worries about disruption to harvesting.

Malaysia is losing up to 25% of its potential palm oil yield due to a labour shortage that is expected to worsen in the coming months, the Malaysian Palm Oil Association said on Monday.

"We are inclined to believe that this rally has more legs, as August production is also expected to remain nonchalant," Paramalingam added.

Malaysia's palm oil exports for July 1-20 fell between 3.5% and 4.6% from the previous month, cargo surveyors said.

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