Malaysian palm oil futures snapped a three-day rally on Thursday, slipping from a two-year high hit earlier in the session due to fall in rival oils and profit taking by traders, but a weaker ringgit capped losses.
The benchmark palm oil contract on the Bursa Malaysia Derivatives Exchange ended 0.8% lower at 2,663 ringgit ($638.92) per tonne, after touching 2,709 ringgit earlier in the session, its highest level since Nov. 17, 2017.
"The contract is tracking losses in rival oils," a Kuala Lumpur-based trader said. The Dalian Commodities Exchange's January palm oil contract plunged 0.3% as traders locked in profits after it reached a new record high in the previous session.
The losses were capped by a weaker ringgit, which fell 0.1% against the dollar on Thursday, making the edible oil cheaper for holders of foreign currencies. Meanwhile, Dalian's soyaoil contract fell 0.1%, while soyaoil on the Chicago Board of Trade fell 0.6%.
Palm is affected by price movements in related oils as they compete for share in the global vegetable oils market. Leading industry analyst James Fry on Wednesday said that top palm oil producers Indonesia and Malaysia is expected to see little growth in output next year, potentially leading to a supply deficit and higher prices.
Malaysia aims to start producing palm oil-based biojet fuel within five years and is in talks with several potential partners about setting up a plant, the head of the Malaysian Palm Oil Board said on Wednesday, although traders say that the plan is too long term to affect prices now.
Malaysia and Indonesia already have mandates requiring fuel to have 20% bio-content in the form of palm oil while Indonesia, the world's top producer, is planning to implement 30%.