Palm resolute in its stance on El Nino

Malaysian palm oil futures traded in a narrow range on Monday as traders priced in the risk that El Nino could disrupt production next year.

By midday, the benchmark palm oil contract for November delivery at the Bursa Derivatives exchange in Malaysia had risen 0.19% to $4,816 Ringgit ($1,181.84) per metric ton. 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 tranche.

The trader added that "the firm pricing in the future months suggests that some market players are positioning themselves for a potential shortage in palm oil in 2027 due to expectations that El Nino-related weather patterns could weigh down on palm oil production."

Dalian Commodity Exchange soyoil contracts that are most active rose by 0.55% while palm oil contracts gained 0.25%. Prices of soyoil on the Chicago Board of Trade were down by 0.07%.

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

Oil prices increased as the market became more concerned about geopolitical risks due to fading expectations of an U.S.-Iran breakthrough in peace and a slower flow of tankers through the Strait of Hormuz.

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

The ringgit (palm's trade currency) strengthened by 0.22% versus the dollar. This made the commodity slightly cheaper for buyers who hold foreign currencies. Intertek Testing Services, a cargo surveyor, estimated that Malaysian palm oil exports?for the period of August 1-15?fell 7.9% compared to a month ago. AmSpec Agri Malaysia will release their estimates later today. Indonesian President Prabowo Subianto has announced plans to establish a new exchange to set prices of strategic commodities for the country by the beginning of next year. This is a bold move to use the vast resources available in the country to boost the economy. Technical analyst Wang Tao believes that palm oil could test the support level of 4,696 ringgits per metric tonne. A break below this mark would trigger a drop to 4,674 rings.

(source: Reuters)