19/12/2022 (The Edge Markets) - Palm oil extended its rally on worries that heavy monsoon rains in Southeast Asia will disrupt operations at estates and slash output in top producers Indonesia and Malaysia.

Futures for March delivery climbed as much as 1.5% before ending at RM3,932 (US$888) a tonne. Palm, the most-consumed cooking oil, has rebounded from its recent two-month low on weaker production and anticipation that Indonesia’s new biofuel mandate will reduce its surplus for export.

Lower shipments from Indonesia, weaker production numbers and tight supplies in Malaysia are pushing up prices and should keep palm oil stable above RM3,800, according to Abdul Hameed, director of sales at Manzoor Trading in Pakistan.

“Bad weather in Malaysia has flooded many states, which may slow down operations at estates and cause production numbers to go down,” he said. “The same may happen in Indonesia as well.” Malaysia’s meteorological department issued warnings for continuous rain through Wednesday across several states, including key palm-growing areas of Pahang, Johor and Perak. The number of flood victims in the country rose sharply on Monday, as rivers in Pahang and Kelantan crossed danger levels, state news agency Bernama reported. Authorities are also still in midst of search and rescue operations for the remaining victims of a deadly campsite landslide on Friday (Dec 16), which has killed 24 people.

The tropical oil will also be bolstered by Indonesia’s mandate to use more palm for producing biofuels, as well as lower reserves in Malaysia, according to veteran trader Dorab Mistry on Saturday (Dec 17). He forecasts prices to trade between RM3,500 and RM5,000 between now and end-May, unless the war in Ukraine ends.

Prices

·         Palm for March delivery on Bursa Malaysia Derivatives rises as much as 1.5% to RM3,978/tonne.

·         Futures close +0.4% at RM3,932/tonne; -16% YTD.

·         Soybean oil for March in Chicago +0.4% to 62.73c/lb.

·         Refined palm oil for May on Dalian Commodity Exchange closed -0.8% at 7,766 yuan/tonne; soybean oil for May -0.8% to 8,468 yuan/tonne.

·         Soybean oil’s premium over palm ~US$495/tonne vs average of ~US$376 in past year: data compiled by Bloomberg.

·         Palm’s discount to gasoil US$8.51/tonne vs average premium of ~US$104 in past year: data compiled by Bloomberg.

https://www.theedgemarkets.com/article/palm-oil-advances-concerns-wet-weather-will-curb-production