Palmetto erases gains due to market caution and Dalian weakness

Malaysian palm oils futures lost their early gains on Tuesday before the release of the MPOB data at midday. Weaker rival edible oil prices in the Dalian market also weighed on sentiment.

By midday, the benchmark palm oil contract on Bursa Malaysia's Derivatives exchange for April delivery fell 39 ringgit or 0.94% to 4,121 ringgit (1,050.74) per metric ton.

The market was cautious as the MPOB January data was released at midday. According to the industry regulator, Malaysian palm oil stocks in January fell 7.72% to 2.82 metric tons. Surveys had predicted inventories of 2.91 million tons. Production was estimated at 1.61 million tons and exports were expected to be 1.42 million tonnes. PALM/POLL

Dalian's most active palm oil contract fell 0.69%, while the soyoil contract was down by 0.2%. Chicago Board of Trade soyoil prices rose by 0.14%.

Palm oil follows the price movement of other edible oils as it competes to gain a share in the global vegetable oils markets. Malaysia's oil palm plantations will grow to around 2 million hectares (4.94 acres) in 2027, from their current level of 1.7 million. This will put pressure on the output of the world's number two producer. Analysts said that Indian demand for palm oil will rebound this year due to the lower prices. However, competition from Chinese soyoil as an alternative oil will limit growth. Analysts and palm oil traders said that China's palm oil demand is likely to continue declining this year, as it shifts towards cheaper soybean and canola alternatives.

The palm ringgit's trade currency strengthened by 0.25% to the dollar. This made the commodity more costly for buyers who hold foreign currencies.

(source: Reuters)