MARKET DEVELOPMENT
Palm Oil Declines After Four Days of Gains With Floods in Focus
Palm Oil Declines After Four Days of Gains With Floods in Focus
27.12.2021 (www.bloomberg.com) - Palm oil retreated as some investors seek to lock in year-end gains, although concerns remain that floods in Malaysia will curb supplies.
After advancing for four days, benchmark futures fell 1% to close at 4,603 ringgit per ton, the biggest drop in a week. The tropical oil rose 5.5% last week, the most since early October, after flooding hit plantations in second-biggest grower Malaysia, and as soybean prices climbed because of dry weather in South America.
“Year-end profit taking by plantation companies to lock in prices could see some pressure in crude palm oil futures,” said Gnanasekar Thiagarajan, head of trading and hedging strategies at Kaleesuwari Intercontinental in Mumbai.
The damage to oil palms in Malaysia due to rains have been negligible so far and not as severe as initially anticipated, Thiagarajan said. Still, traders will be assessing the flood situation and whether it would further tighten supply.
Malaysia’s meteorological department forecasts a monsoon surge from Monday through to Jan. 2 and a low-pressure weather system in South China Sea that could result in continuous rain in Johor, Pahang, Terengganu, Kelantan, as well as eastern Sabah and western Sarawak.
Thunderstorms, heavy rain and strong winds are forecast in Sabah and Sarawak on Monday, and continuous rain is expected in some palm-growing areas including Lahad Datu and Sandakan through Tuesday, the department said.
Persistent rains could cause floods that disrupt harvesting, transport and processing of palm oil. Sabah, Sarawak, Johor and Pahang are Malaysia’s biggest palm-growing states.