Palm extends its losses amid China trade fears and weak demand

Malaysian palm futures fell for the second session in a row on Thursday as concerns about U.S. Tariffs on China, and a weakened demand for palm, sparked a sale on the vegetable oil market.

At the close, the benchmark palm oil contract on Bursa Malaysia's Derivatives exchange for February delivery fell 46 ringgit or 0.96% to 4,769 Ringgit ($1,069.28).

The contract fell by 2.21% during the previous session.

Paramalingam Supramaniam is the director of Selangor brokerage firm Pelindung Bestari. He said that the sell-offs in Chicago soyoil spilled into Dalian oils and contributed to a drop in Malaysian palm-futures.

He said that speculation that the new Trump administration would impose a tariff of 40% on China had contributed to the decline in vegetable oils. The tariffs, he added, could cause China to shift its purchases of U.S. soy and soybean oil to Brazil and Argentina.

Dalian's palm oil contract, which is the most active contract, fell by 3.94%. Chicago Board of Trade soyoil prices were up by 0.85%.

As rival edible oils compete to gain a share of global vegetable oil market, palm oil monitors the price movement of their competitors.

He said that the demand for palm in November and December is a major concern, as India appears to have already purchased enough supplies. Arrivals are therefore expected to be plentiful.

The oil prices rose as geopolitical fears over the escalating tensions in Russia and Ukraine overshadowed an unexpectedly large increase in U.S. crude stockpiles.

Palm oil is a better option as a biodiesel feedstock because crude oil futures are stronger.

Palm's trade currency, the ringgit, has strengthened by 0.2% against the US dollar, increasing the price of the commodity for buyers who hold foreign currencies.

Analysts said that U.S. soybeans futures fell to a new low of two weeks on Wednesday, and more than 3% due to the expectation of abundant South American soy harvests in this year as well as uncertainty regarding demand for biodiesel fuel based on soy.

(source: Reuters)