Palm oil reaches 4-1/2-month high due to El Nino

Malaysian palm oil futures ended at a ?four-and-a-half-month high on Monday, as traders looked past ?near-term consolidation to price in the risk of an El Nino-driven ?output disruption next year.

The benchmark palm oil contract for November delivery at the Bursa Derivatives exchange in Malaysia rose 0.25% to 4,819 Ringgit ($1,187.53) per metric tonne, marking the highest price since April 3rd. The contract dropped 0.3% during the previous session.

A Kuala Lumpur-based trader reported that the crude palm oil futures markets remained in contango on Monday. The far-month contracts were trading at above 5,000 Ringgit, especially for the February to May 2027 contract.

The trader said that "the firm pricing in the future months suggests that some participants are positioning themselves for a possible supply shortage in 2027 due to expectations that El Nino weather patterns could impact palm oil production."

Dalian Commodity Exchange soyoil contracts that are most active rose by 0.72% while palm oil contracts gained 0.73%. Chicago Board of Trade soyoil prices were up by 0.9%.

Palm oil follows the price movement of other edible oils as it competes to gain a share in the global vegetable oils markets. Oil prices fluctuated amid the lack of progress made in diplomatic efforts to settle Middle East tensions. However, the absence of major supply disruptions limited gains.

Palm oil is a better option as a biodiesel feedstock because crude oil futures are stronger.

The ringgit (palm's currency) strengthened by 0.64% versus the dollar. This made the commodity slightly more expensive for buyers who hold foreign currencies. Intertek Testing Services, a cargo surveyor, estimated that the exports of Malaysian Palm Oil?products fell 7.9% compared to a month ago. AmSpec Agri Malaysia said that their exports increased 3.2%. Indonesian President Prabowo Subianto announced plans to establish a new exchange by the beginning of next year that would set prices for strategic commodities in the country.

(source: Reuters)