Palm oil prices continue to fall amid uncertainty about biofuel policies in Indonesia and the US

Malaysian palm futures fell on Thursday for the fifth consecutive session as market uncertainty over Indonesian biofuel policies and U.S. policy weighed on it.

At midday, the benchmark contract for palm oil delivery in March on the Bursa Derivatives exchange fell 44 ringgit or 0.97% to 4,485 Ringgit ($996.45) per metric ton.

Anilkumar bagani, head of commodity research at Mumbai's Sunvin group, explained that the price decline in crude palm oil continued from Wednesday, following a shift in sentiment on global vegetable oil markets.

This was mainly due to the insecurity over Indonesian and U.S. Biofuel policies, which led to higher subsidies for their respective programmes.

Analysts said that Indonesia's plan, which would expand its biodiesel requirement from January 1, and could reduce global palm oil supply, is more likely to be implemented slowly, since industry participants are seeking a gradual phase-in.

The U.S. Government funding bill, released on Tuesday, included a plan that would allow gasoline to be sold year-round with a higher blend of ethanol. This is known as E15. The traders had stated that a higher blend of corn-based biodiesel in the U.S. would reduce the demand for the soybean oil used to make biodiesel.

Dalian's palm oil contract, which is the most active contract, fell 2.6% while soyoil prices dropped 3.32%. Chicago Board of Trade soyoil prices fell 0.4%.

As palm oil competes to gain a share of the global vegetable oil market, it tracks the price changes of competing edible oils.

The palm ringgit's currency has weakened by 0.76% compared to the U.S. Dollar, making it cheaper for foreign buyers.

Technical analyst Wang Tao stated that palm oil could fall between 4,273-4370 ringgit for a metric ton due to a wave c. ($1 = 4.5010 ringgit)

(source: Reuters)