Palm climbs on anticipated output drop, Indonesia uncertainty caps gains

KUALA LUMPUR: Malaysian palm oil futures inched higher on Monday after falling for two straight sessions, driven by anticipated lower output in May, but concerns over Indonesia’s B50 biodiesel mandate and its export policies capped the gains.

The benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange was up 19 ringgit, or 0.42%, at 4,573 ringgit ($1,123.59) a metric ton at the close.

The market traded higher on anticipation of a bigger-than-expected decline in Malaysian palm oil production in May, a weaker ringgit, and a rebound in energy prices, said Anilkumar Bagani, commodity research head at Sunvin Group.

The Malaysian Palm Oil Board is expected to release its monthly supply and demand data on June 10.

“The recovery in Chicago soyoil futures also helped to prop up prices,” Bagani said.

However, he added that a continued lack of clarity around Indonesia’s mandatory blending rate for palm-based biodiesel to 50%, or B50, and the prospects of aggressive Indonesian cash market palm oil selling ahead of the full implementation of the new export system may hinder a recovery in Malaysian palm oil prices.

Soyoil prices on the Chicago Board of Trade were up 0.38%. Dalian’s most-active soyoil contract fell 0.82%, while its palm oil contract shed 0.49%.

Palm oil tracks the price movements of rival edible oils, as it competes for a share of the global vegetable oils market.

Oil prices rose more than 4%, as renewed Israeli strikes on Iran and fresh attacks on Lebanon soured hopes of an imminent end to the wider war.

Stronger crude oil futures make palm a more attractive option for biodiesel feedstock.

The ringgit, palm’s currency of trade, weakened 1.12% against the dollar, making the commodity cheaper for buyers holding foreign currencies.