Palm falls on weaker competitors, but ringgit is firm; second weekly fall set to occur

Malaysian palm futures dropped more than 1% Friday, and were on track for a second consecutive weekly drop as weaker rival edible oils weighed on the market.

By midday, the benchmark March palm oil contract on Bursa Derivatives exchange fell 47 ringgit or 1.18% to 3,933 Ringgit ($963.97) per metric ton. The contract has fallen 0.92% this week.

A Kuala Lumpur-based trader said that the main reason for the decline in crude?palm oil was the weakness on the oilseeds markets. The Dalian palm olein, which is a rival to palm oil, remained negative overnight after overnight drops.

The trader said that a firm ringgit at 4.08 is also preventing buyers from buying.

The palm ringgit's currency, the dollar, has strengthened by 0.02%, making it slightly more expensive for buyers holding foreign currencies.

Dalian's most-active palm oil contract dropped 1.31% while the soyoil contract declined 1.51%. Chicago Board of Trade soyoil prices edged up by 0.04%.

As rival edible oils compete to gain a share of global vegetable oil market, palm oil monitors the price movement of their competitors.

Oil prices fell early in trading, and they were expected to close lower for the second consecutive week as prospects of a peace agreement between Russia and Ukraine offset concerns about supply disruptions caused by a blockade on Venezuelan oil tankers.

Palm oil is less appealing as a biodiesel feedstock due to the weaker crude oil futures.

The Indonesian Palm Oil Association reported that despite an increase of production, Indonesian palm oil stocks at the end October were down 10% from one month earlier.

After a pushback by the industry, and fears that the digital system needed to enforce the law was not yet ready, the European Union countries have approved an agreement to delay it for a year.

(source: Reuters)