Palm production slips due to low volume and muted expectations
Malaysian palm futures continued to fall for a fourth consecutive session on Thursday, amid lower trading volume and concerns over low production expectations.
By midday, the benchmark palm oil contract on Bursa Derivatives exchange for November delivery was down 20 Ringgit or 0.51% at $3,866 ringgit (US$892.84) per metric ton.
"A rather thin volume today suggests a lack of activity in the sales sector." "The biggest concern is the low arrivals of fruit bunches, and poor production performances in both August and September", said Paramalingam Supramaniam at Selangor brokerage Pelindung Bestari.
A survey revealed that Malaysian palm oil inventories were expected to be at their highest level in six months by the end of August, due to a lacklustre demand for exports.
Dalian's palm oil contract, which is the most active contract in Dalian, fell by 0.68%. Chicago Board of Trade rose 0.2%.
As they compete to gain a share of the global vegetable oil market, palm oil monitors price movements for related oils.
The Malaysian Ringgit, the palm oil's trade currency, increased by 0.46% in value against the US dollar. Palm oil becomes less appealing to foreign currency holders when the ringgit is stronger.
Indonesia, which is the largest palm oil exporter in the world, has plans to reduce the export levies on the oil to increase its competitiveness with rival vegetable oils, and to raise the income of farmers.
According to Amspec Agri, Malaysian palm oil exports in August totaled 1,376,412 tonnes.
Intertek Testing Services, a cargo surveyor, said that exports of Malaysian products containing palm oil for August dropped 9.9% from the 1,604,578 tonnes shipped in July to 1,445,442 tonnes.
The price of oil edged upwards after plummeting to multi-month highs earlier as major producers delayed an increase in output planned for next months and U.S. stocks fell. However, the gains were still limited by persistent concerns about demand.
Palm oil is a better option as a biodiesel feedstock because crude oil futures are stronger.
According to Wang Tao, a technical analyst, palm oil could break support at 3,864 Ringgit per ton and drop into the range of 3,777 to 3,821 Ringgit.
(source: Reuters)
