Palm demand is lagging as output pressure increases and the price of palm drops
The price of Malaysian palm oil futures was range bound on Thursday as the market awaited higher production, but export demand had not yet recovered.
By midday, the benchmark 'palm oil contract' for a September delivery on the Bursa Derivatives Exchange had fallen 10 ringgit or 0.22% to 4,547 Ringgit ($1,113.91).
Paramalingam Supramaniam is the director of brokerage Pelindung Bestari. She said that there was no bullish market sentiment at present, because production continues to increase, but exports are anemic.
"With the production momentum increasing, it's only a matter of time before more selling pressure is felt on the market. Prices are currently range-bound while participants wait for the Malaysian Palm Oil Board's (MPOB) report.
Supramaniam said that it seems like a stock buildup is inevitable.
MPOB will release its monthly demand and Supply data on July 10th.
Dalian's most active palm oil contract fell 0.32%, while the soyoil contract rose 0.48%. Chicago Board of Trade soyoil prices were up by 0.21%.
Palm oil follows the price movement of other edible oils, as it competes to gain a share in the global vegetable oil markets. Oil prices fell 1% on a third day in a row after Qatar announced that Iran and the U.S. made progress with indirect talks centered around the Strait of Hormuz which supplies one-fifth of the world's oil.
Palm oil is less appealing as a biodiesel feedstock due to the weaker crude oil futures.
The ringgit (the 'palm currency') has strengthened by 0.27% against dollar. This makes the commodity slightly cheaper for buyers who hold foreign currencies. Indonesia's 50%?biodiesel blend mandate came into effect on Wednesday. The fuel blend must be half palm-based and conventional diesel, known as B50. Stakeholders are still waiting for a revised allocation of biodiesel from the government. Technical analyst Wang Tao believes that palm oil could 'test resistance' at 4,587 Ringgit per metric ton. A break above this level would lead to gains in the range of 4,604-4.619 Ringgit.
(source: Reuters)
