Palm erases gains on market caution, Dalian weakness

JAKARTA: Malaysian palm oil futures erased early gains and traded lower on Tuesday, before the Malaysian Palm Oil Board’s (MPOB) data was released during the midday break, while weaker rival edible oils in the Dalian market also weighed on sentiment.

The benchmark palm oil contract for April delivery on the Bursa Malaysia Derivatives Exchange fell 39 ringgit, or 0.94%, at 4,121 ringgit ($1,050.74) a metric ton, by the midday break.

The market was cautious ahead of the MPOB January data, which was released during the midday break. It showed that Malaysia’s palm oil stocks in January slipped 7.72% undefined from the previous month to 2.82 million metric tons, according to the industry regulator on Tuesday.

A Reuters survey had forecast inventories at 2.91 million tons, output at 1.61 million tons, and exports at 1.42 million tons.

Dalian’s most-active soyoil contract was down 0.2%, while its palm oil contract lost 0.69%. Soyoil prices on the Chicago Board of Trade rose 0.14%.

Palm oil tracks the price movements of rival edible oils, as it competes for a share of the global vegetable oils market. Malaysia’s ageing oil palm plantations are expected to rise to 2 million hectares (4.94 million acres) by 2027 from the current level of around 1.7 million hectares, an industry official said on Tuesday, putting pressure on output from the world’s second-largest producer.

Indian demand for palm oil is set to rebound this year as prices have come down, analysts said on Monday, although competition from Chinese soyoil, an alternative oil, will cap growth.

China’s demand for palm oil is expected to further decline this year as the country shifts to cheaper canola and soybean alternatives, palm oil traders and analysts said on Monday.

The ringgit, palm’s currency of trade, strengthened 0.25% against the dollar, making the commodity more expensive for buyers holding foreign currencies.