Palmettos rise on expected output decline, but Indonesian uncertainty limits gains

Malaysian palm oil futures rose Monday, after two consecutive sessions of declines. Prices were supported by the expectation that production will be lower in May. However, concerns about Indonesia's B50 mandate for biodiesel and its export policies restricted further gains. By midday, the benchmark August palm oil contract on the Bursa Derivatives exchange was up 20 Ringgit or 0.44% at 4,574 Ringgit ($1,124.39). Anilkumar bagani, commodity researcher at Sunvin Group, says the market rose on expectations of a "larger-than-expected decrease in Malaysian palm production in May", a "weaker ringgit" and a "rebound in energy price".

Malaysian Palm Oil Board will release their monthly data for supply and demand on June 10th. Bagani said that the recovery in Chicago soyoil prices also contributed to the price increase. Bagani said that the lack of clarity surrounding Indonesia's mandatory blend rate of palm-based biodiesel at 50% or B50 and the prospect of aggressive cash market palm oil sales in Indonesia before the full implementation the new export system could hinder a recovery of Malaysian palm oils prices.

The Chicago Board of Trade Soyoil prices rose by 0.59%. Dalian's soyoil most active contract dropped 0.82% while palm oil contract fell 0.54%.

Palm oil follows the price movement of edible?oils as it competes for a market share in the global vegetable oils. Brent oil prices rose more than $3 per barrel, initially spooked after Israel launched renewed strikes on Lebanon the day before, but gained further momentum when sounds of explosions in Iran were heard.

Palm oil is a better option as a biodiesel feedstock because of the stronger?crude futures. The palm currency, the ringgit, has weakened by 1.07% against dollars, making it cheaper for buyers with foreign currencies.

(source: Reuters)