Palm gives up early gains on stock rise expectations

The price of Malaysian palm oils futures was little changed on Thursday, despite the early gains. This is because expectations for rising stocks were countered by stronger edible oils from rival companies and a weaker Malaysian ringgit.

By midday, the benchmark palm oil contract on Bursa Derivatives Exchange for March delivery had fallen 1 ringgit or 0.02% to 4,032 Ringgit ($992.86) per metric ton.

The market expects a lower decline in December production, which could push Malaysia’s inventories over?3million tons. This would erase earlier gains on a weaker Dalian vegetable oil and a weaker Ringgit. A Kuala Lumpur based trader said that external markets were also improving.

The trader stated that?the Malaysian Palm Oil Association estimated a 4.64% drop in December production, which was smaller than the market participants' expectation of a 9% decline.

An official from the energy ministry told reporters that Indonesia would likely increase its palm-oil export levy to support the country's mandate for biodiesel, citing a lack of funds.

Indonesia consumed 14,2 million kilolitres (or 7.6% more) of palm-based Biodiesel by 2025. This was a 7.6% rise compared to last year. The country had implemented a mandate for 40% biodiesel blend, also known as B40.

Dalian's palm oil contract gained 1.27%, but its most active soyoil contract grew by 0.18%. Chicago Board of Trade soyoil prices fell 0.16%.

Palm oil monitors the price movements of competing edible oils as it competes to gain a share in the global vegetable oils market.

On Wednesday, Indonesian President Prabowo said that his government could seize between 4 and 5 million hectares of palm oil plantations (12 million acres) this year. This is on top of 4.1 million hectares of palm oil plants seized in the previous year.

Analysts say that this could, combined with Indonesia's ambitious "biodiesel" plans, put even more upward pressure on palm oil prices globally.

Technical analyst Wang Tao believes that the price of palm oil could return to its high level of 4,102 ringgit a ton on December 30, driven by wave c. ($1 = 4.0610 ringgit)

(source: Reuters)