Palm subdued by higher production and stronger Ringgit

Malaysian palm futures fell on Thursday, as higher production levels and a stronger Ringgit dampened sentiment. This was despite gains for Chicago soyoil.

By midday, the benchmark palm oil contract on Bursa Derivatives exchange for October delivery was down 6 Ringgit or 0.14% at 4,309 Ringgit ($1,022.30), a metric tonne. The contract has risen in the past two sessions.

Anilkumar bagani, Sunvin Group's research head, said that the higher-than expected production scenario had halted the palm oil price rally. The ringgit is strengthening against the U.S. Dollar, contributing to the fall in the contract denominated in ringgit.

Bagani added that the sharp rise in palm oil prices has slowed India's purchases of new palm oil, adding to their cautious mood.

Dalian's palm oil contract grew by 0.27%, while the most active soyoil contract increased by 0.55%. Chicago Board of Trade soyoil prices were up by 0.02%.

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

The palm ringgit's trade currency strengthened by 0.24% against dollars, increasing the price of the commodity for buyers who hold foreign currencies.

Oil prices rose, buoyed by optimism over U.S. trade negotiations that would ease pressure on the global economy and a sharper-than-expected decline in U.S. crude inventories.

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

The Indonesia Palm Oil Association reported that Indonesian palm oil stocks had decreased by 4.27% in May compared to the previous month, to 2.9 millions metric tons. This was due to an increase in exports.

(source: Reuters)