KUALA LUMPUR: Malaysian palm oil futures fell on Wednesday despite a deeper-than-expected cut in April production and stockpiles, as investors shifted focus to rising supply from top producer Indonesia.

The benchmark palm oil contract for July delivery on the Bursa Malaysia Derivatives Exchange closed down 106 ringgit, or 2.78%, to 3,701 ringgit ($834.50) a tonne, ending a five-day climb.

Malaysia’s end-April palm oil inventories fell 10.54% from the month before to 1.5 million tonnes, according to Malaysian Palm Oil Board (MPOB) data.

Production and exports declined more than industry forecasts. MPOB data showed output declined 7.13% from March to 1.2 million tonnes, while exports plunged 27.78% to 1.07 million tonnes.

Meanwhile, exports during May 1-10 rose between 1% and 10% from the month before, according to data from cargo surveyors Amspec Agri Malaysia and Intertek Testing Services.

Expectations for a huge drop in Indonesia’s crude palm oil export reference price for May 16-21 suggest that Jakarta is likely to further normalise exports beyond its domestic sales requirement, said Marcello Cultrera, director at Singapore-based commodities consultancy Apricus 8 Pte Ltd.

At the same time, Indonesia production in May is seen rising by 20% to 25%, with its products at stronger discounts to Malaysia, thus triggering a decline in the market despite a bullish MPOB report, he added.

Industry analyst Dorab Mistry said palm oil prices can rise above 4,000 ringgit per tonne in the second half of 2023 as the El Niño weather pattern develops.

Dalian’s most-active soyoil contract fell 1.3%, while its palm oil contract slipped 1.3%. Soyoil prices on the Chicago Board of Trade were down 0.8%.

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