Palm gains from better export estimates and expectations of low output

After two sessions of declines, Malaysian palm oil futures eked out a slight gain on Monday, backed by increased export estimates and expected seasonal palm production decreases.

The benchmark contract for palm oil delivery in January on the Bursa Derivatives exchange gained 49 ringgit or 1.15% to 4,304 Ringgit ($1,001.16), a metric tonne, during the lunch break.

The contract dropped 1.3% over the last two sessions.

Palm prices are responding to better export estimates, and the expectation of a weaker production in the next few weeks, in line with seasonal weakness. This was said by David Ng, a proprietary trading at Kuala Lumpur based trading firm Iceberg X Sdn Bhd.

Intertek Testing Services, a cargo surveyor, estimated that the exports of palm oil products from Malaysia rose by 8.7% between Oct. 1-20. AmSpec Agri Malaysia will release its data later today.

The Malaysian Palm Oil Board reported earlier this week that crude palm oil output was down 3.8% from August to September, while palm oils exports were up 0.93%.

Dalian's palm oil contract, which is the most active contract, fell by 0.76% while soyoil prices dropped by 0.58%. Chicago Board of Trade soyoil prices were up 0.6%.

As they compete to gain a share in the global vegetable oil market, palm oil monitors prices of competing edible oils.

Early trading saw oil prices stabilize after a drop of more than 7% last week due to concerns about demand in China, which is the world's largest oil importer. Also, there was a easing in worries over possible supply disruptions in Middle East.

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

The palm ringgit's currency has strengthened by 0.07% against U.S. dollars, increasing the price of the commodity for buyers who hold foreign currencies.

Anwar Ibrahim, the Prime Minister of Malaysia, said that Malaysia will raise the threshold to levy a windfall profits levy on palm oil. It also plans to revise its export duty for crude oil palm.

Glenauk Economics stated that a higher WPL would reduce the pressure on the palm oil industry to increase production costs, as reported by state news agency Bernama. Meanwhile, export tax adjustments could help the palm refinery to get similar advantages to Indonesia at the downstream segment. Glenauk Economics said that $1 = 4.2990 Ringgit (Reporting and editing by Ashley Tang)

(source: Reuters)