21.05.2021 (themalaysianreserve.com) - Palm oil headed for its biggest weekly drop in two months as soy markets continued to slump and investors fretted that a resurgence in coronavirus infections in several countries will dampen demand.

Futures whipsawed on Friday, with the August contract falling as much as 1.8% and rising as much 0.5%.

The tropical oil, used in everything from cookies to lipstick and shampoo, has tumbled more than 9% so far this week.

Soy oil , palm’s closest food and fuel substitute, is down 3% this week in Chicago, while soybeans are set for their worst weekly loss since January

“Demand from India is weakening, while Chicago and Dalian markets keep falling,” said Rajesh Modi, a trader at Sprint Exim Pte in Singapore.

“There’s a lot of uncertainty due to Covid.”

India, which became the world’s fastest-growing coronavirus hotspot after a deadly second wave, may slash edible oil purchases due to lower consumption from bulk users such as restaurants and hotels.

The top palm oil importer has so far reported 26 million Covid-19 cases, with half of the infections occurring in the past two months.

In Malaysia, markets are under pressure amid growing concerns of another nationwide lockdown.

Officials are gathering to meet on Friday to decide the next course of action after virus infections surged to a record for a second day on Thursday.

Investors are keeping a watch on any new regulation that could disrupt harvesting or further delay the intake of much-needed foreign workers in plantations.

“Palm oil production may be affected due to movement restrictions and labor shortages in Malaysia,” Modi said.

“While it’s possible that yields may rebound in the second half of the year, it may be limited due to Malaysia’s Covid situation.”