Palm oil prices drop on firmer Ringgit

After two sessions of gains, Malaysian palm oils futures fell on Wednesday. The ringgit's strength has made the commodity costlier for buyers who hold foreign currencies.

At the midday break, the benchmark palm oil contract on Bursa Derivatives exchange for January delivery fell 14 ringgit (0.34%) to 4,123 Ringgit ($976.09) per metric ton. The contract has risen 0.61% over the last two sessions.

David Ng said that the market was lower due to the stronger ringgit, a proprietary trading at Kuala Lumpur based trading firm Iceberg X Sdn. Bhd.

As of 0500GMT the ringgit, which is palm's trade currency, increased by 0.15% to 4,13 against the U.S. dollar, reaching its highest level for a year.

Dalian's soyoil contract with the highest volume of trading rose by 0.39% while palm oil contracts fell by 0.21%. Chicago Board of Trade soyoil prices were up by 0.16%.

As palm oil competes to gain a share in the global vegetable oils industry, it tracks price changes of competing edible oils.

The oil prices rose slightly in the previous session on expectations that the end of the longest U.S. government shut down could increase demand.

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

An official from the Energy Ministry said that Indonesian biodiesel consumption reached 12,25 million kilolitres as of November 10, this year, of palm oil fatty acid methyl esters.

The Chinese state-trader COFCO, through its oilseed unit, has signed agreements with Brazilian producers to buy soybeans, soybean oil and palm oil in total of nearly 20 million tonnes, worth more than $10 billion.

Technical analyst Wang Tao predicted that palm oil would retest the resistance level of 4,174 ringgits per ton. A break above this could trigger a rise into the range 4,196 to 4,223 ringsgit, Wang Tao added.

(source: Reuters)