VEGOILS - Boost exports on the back of positive estimates and weak output

Malaysian palm oil futures ended up higher on Monday after two sessions of losses. Supported by higher export estimates, and expected seasonal palm production decreases, the prices rose.

The benchmark contract for palm oil delivery in January on the Bursa Derivatives exchange gained 46 ringgit or 1.08% to 4,301 Ringgit ($1,000.23).

The contract dropped 1.3% over the last two sessions.

Palm prices are currently reacting to better export estimates, and the expectation of a weaker production in the next few weeks, in line with seasonal weaknesses, according to David Ng, a proprietary trading at Kuala Lumpur based trading firm Iceberg X Sdn Bhd.

Exports of Malaysian Palm Oil Products rose between 8.7% to 9.5% from Oct. 1-20 compared with a similar period last month.

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 0.89% while soyoil prices dropped by 0.92%. Chicago Board of Trade soyoil prices were up by 1.2%.

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

The oil prices were largely stable, after a drop of more than 7% last week, due to concerns over demand in China, which is the world's largest oil importer. Also, there was a easing in worries about 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 0.05% compared to the U.S. Dollar, 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 impose a Windfall Profit Levy (WPL), on palm oil. It also plans to revise its export duty on crude palm oil.

According to the state news agency Bernama (MPOB), a higher WPL would reduce the pressure on the production costs of palm oil. Glenauk Economics also said that export tax adjustments could help the palm oil refinery industry to get similar benefits compared to Indonesia at the downstream segment.

(source: Reuters)