Palmetto reaches highest level since over two years, due to low production and policy changes by top producers
The price of palm oil futures in Malaysia rose on Wednesday to its highest level in over two years, driven by the anticipated decline in production and the policy actions of two major producers.
At the close of the Bursa Derivatives Market, the benchmark palm oil contract on January delivery gained 100 ringgit or 2.28% to 4,486 Ringgit ($1,031.98) per metric ton. The contract had earlier reached 4,514 Ringgit, its highest level since July 4, 2020.
Paramalingam Supramaniam of Selangor's brokerage Pelindung Bestari said that the prices are rising due to Malaysia's revision in export duties and Indonesia's increase of palm-based biodiesel blend up to 40%.
Malaysian Government Last Friday announced that it would increase the maximum export duty to 10% on crude palm oil above 4,050 Ringgit per metric tonne from November 1.
Indonesia's Agriculture Minister reaffirmed that the country plans to implement a mandatory 40% biodiesel blend with palm oil based fuel known as B40 in January. He also said that the country would work towards implementing the B50 standard in the future.
Paramalingam stated that "production is expected to continue to decline in Malaysia, and the rising demand continues to fuel bullish sentiment on the market."
Together, Indonesia and Malaysia are the top two palm oil producers in the world, accounting for 85% of total palm oil production.
Dalian's palm oil contract, which is the most active contract in Dalian, gained 3.48% while soyoil prices increased by 2.47%. Chicago Board of Trade soyoil prices were up by 0.05%.
As palm oil competes to gain a share in the global vegetable oils industry, it tracks prices of competing edible oils.
The palm ringgit's currency, the U.S. Dollar, fell by 0.51%, making the commodity more affordable for buyers who hold foreign currencies.
After industry data revealed that U.S. crude stocks grew more than expected, oil prices dropped.
Palm oil is less appealing as a biodiesel source due to the weaker crude oil futures. $1 = 4.3470 Ringgit (Reporting and Editing by Ashley Tang)
(source: Reuters)
