Palm prices rise on higher soyoil, in anticipation of a decline in production
The price of Malaysian palm oil futures increased on Tuesday, reflecting the gains made by rival soyoil and supported in part by an expectation that production will decline in Malaysia.
By midday, the benchmark palm oil contract on Bursa Derivatives Exchange for February delivery rose 36 ringgit (0.77%) to 4,735 Ringgit ($1,061.18) per metric ton.
David Ng, a proprietary trading at Kuala Lumpur's Iceberg X Sdn. Bhd., explained that the palm market was reacting to higher soyoil.
He said that the palm oil market has been under a lot pressure to sell, and with the expectation of a weaker production in Malaysia as well s the positive sentiment on the soyoil markets, the market was looking for a catalyst that could drive it higher.
On December 10, the Malaysian Palm Oil Board will release its monthly demand-supply data for November.
Dalian's palm oil contract, which is the most active contract, gained 2.08 percent. Chicago Board of Trade soyoil prices increased by 3.02%.
As palm oil competes to gain a share in the global vegetable oil market, it tracks the price changes of competing edible oils.
The palm ringgit's currency has weakened by 0.31% compared to the U.S. Dollar, lowering the price of the commodity for foreign buyers.
Investors weighed on the oil risk premium as they reacted to a possible ceasefire between Israel, Hezbollah and Iran.
Palm oil is a better option as a biodiesel feedstock because crude oil futures are stronger.
Industry officials have said that rapeseed and mustard will likely decrease in India due to the high temperatures of the sowing period. Farmers are switching to other crops which offer similar returns but are less susceptible to heat. India could be forced to import more expensive cooking oils like palm oil, sunflower oil and soyoil to meet the demand if it's main winter-sown oil seed crop is lower than expected. Technical analyst Wang Tao stated that palm oil could break support at 4,647 Ringgit per metric tonne and drop into a range of 4,510 to 4,553 Ringgit.
(source: Reuters)
