SINGAPORE: Malaysian palm oil futures fell on Tuesday, extending losses amid prolonged weakness in rival edible oils and a stronger ringgit, although higher crude oil prices capped losses.
The benchmark palm oil contract for April delivery on the Bursa Malaysia Derivatives Exchange fell 60 ringgit, or 1.52%, to 3,888 ringgit ($822.68) a metric ton by the midday break.
“Palm is following the weakness in soft oils,” said Pranav Bajoria, director of Singapore-based brokerage Comglobal Pte Ltd.
Dalian’s most-active soyoil contract tumbled 2.97%, while its palm oil contract dropped 2.17%. Soyoil prices on the Chicago Board of Trade fell 0.42%.
Chicago soybean futures touched a two-year low, weighed down by improving supply expectations from South America and concerns about demand from China.
Palm oil is affected by price movements in rival oils as they compete for a share of the global vegetable oils market.
In recent sessions, palm has been more driven by macros as opposed to new weather or demand developments, as the market revises its outlook on the US Federal Reserve’s rate cuts, Pranav said.
Markets are currently pricing in a 46.6% chance that the Fed will begin rate cuts in March, dropping from 73.4% a month ago, according to the CME FedWatch Tool.
Palm oil snaps three-day winning streak on weak rival oils, profit taking
The Malaysian ringgit, palm’s currency of trade, strengthened 0.13% against the dollar, with market participants moving cautiously ahead of the two-day Fed meeting that kicks off on Tuesday.
A stronger ringgit makes palm oil less attractive for foreign currency holders. Oil prices rose as escalating geopolitical tensions in the Middle East continue to fuel supply concerns.
LSEG Agriculture Research believes palm oil futures will trend down this week, citing potentially higher future Malaysian palm output following a government move that would allow plantations to hire foreign workers.
Palm oil may fall to 3,872 ringgit per metric ton, as it has broken support of 3,935 ringgit, said Reuters technical analyst Wang Tao.