Palm oil futures decline despite Indonesian biodiesel drive
Malaysian palm futures declined on Wednesday. This was a reversal of?course following four consecutive sessions of gains.
The benchmark palm oil contract for June delivery at the?Bursa Derivatives exchange shed 60 ringgit or 1.24% to 4,768 Ringgit ($1,184.89).
Anilkumar bagani, head of commodity research at Sunvin Group in Mumbai, said that crude palm oil futures were higher by midday following confirmation of Indonesia's biodiesel program and the upward trend in energy prices.
Airlangga Hartarto, Indonesia's senior economist, said that the country would increase the mandatory blend?rate of palm-based biodiesel from the current 40% to 50% or B50 starting in July.
The Indonesian palm oil association stated that the demand for biodiesel was expected to reach 15 million metric tonnes this year, after factoring in B50?programme. This is an increase of 2 million tons over last year.
Bagani said that "stronger Malaysian palm oil export performance in March, the weaker ringgit and higher Chinese vegetable oils futures provided additional support."
Bagani stated that the fresh destination demand is softening, as fresh purchases are not being made from India due to the high price and volatility of the rupee against U.S. dollars, which has caused importers to limit their exposure.
Exports of palm oil products from Malaysia rose between 44.3% to 56.7% in March, according to cargo surveyors.
Dalian's palm?oil contract, which is the most active contract, fell by 1.59% on Wednesday. Prices of soyoil on the Chicago Board of Trade eased by 1.16%.
Palm oil tracks the price movement of competing edible oils in its competition for a piece of the global vegetable oil market.
Oil prices reversed gains earlier as markets were unnerved by the situation in the Middle East and U.S. president Donald Trump suggested that the U.S./Israeli war against Iran may be 'coming to an end.
Weaker crude futures make palm a less appealing option as a?biodiesel source.
The dollar has strengthened by 0.54%, which makes palm slightly more expensive to buyers who hold foreign currencies. Ashley Tang (Reporting; Sumana Nanandy, Janane Vekatraman and Dita Pujara edited)
(source: Reuters)
