Palm edges lower on US-China trade war, output worries

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KUALA LUMPUR (May 9): Malaysian palm oil futures eased in the first half of trade, in line for second session of losses, as worries over US-China trade relations and a bearish sentiment due to higher-than-forecast output in April weighed.

The benchmark palm oil contract for July delivery on the Bursa Malaysia Derivatives Exchange was last down 0.8% at RM2,021 (US$486.99) a tonne at the midday break.

"Both factors — the trade war and higher April production — caused the market's fall today," said a Kuala Lumpur-based trader, referring to data from the Malaysian Palm Oil Association. It reported a 2.3% monthly rise in output.

A Reuters poll had forecast that Malaysia's production in April would fall to 1.64 million tonnes, down 1.9% from March. Stocks are also seen declining 5% to RM2.77 million.

Official data from government body, the Malaysian Palm Oil Board, reporting on end-stocks, production and exports is scheduled for release on Friday after 0430 GMT.

"The market however could also be supportive later due to the ringgit," the trader added.

The ringgit, palm's currency of trade, weakened 0.1% against the dollar to 4.1500 around Thursday noon, in line for a seventh straight day of loss.

A weaker ringgit usually supports palm oil prices by making it cheaper for foreign buyers.  

Global stocks and commodities markets were hit earlier this week after US president Donald Trump threatened to impose additional tariffs on Chinese imports.

The US announced that tariffs on US$200 billion worth of Chinese goods would increase to 25% from 10% on Friday, right in the middle of two days of meetings between Chinese Vice Premier Liu He and Trump's top trade officials in Washington.

In other related oils, the Chicago July soybean oil contract fell 0.6%, while the May soyoil contract on the Dalian Commodity Exchange edged up 0.1%.

Meanwhile, the Dalian May palm oil contract slipped 0.5%.

Palm oil prices are affected by movements in soyoil, with which it competes for global market share.       

Palm, soy and crude oil prices at 0509 GMT

Contract          Month    Last  Change     Low    High  Volume
MY PALM OIL       MAY9     1900  -22.00    1900    1900       8
MY PALM OIL       JUN9     1986  -19.00    1981    1996     398
MY PALM OIL       JUL9     2021  -16.00    2012    2031    6362
CHINA PALM OLEIN  MAY9     4150  -22.00    4144    4150     196
CHINA SOYOIL      MAY9     5268   +6.00    5242    5400      72
CBOT SOY OIL      JUL9    26.84   -0.16    26.8   26.92    3376
INDIA PALM OIL    MAY9   520.20   -0.40  518.60   520.3      38
INDIA SOYOIL      MAY9    739.9   +1.30   737.6  739.95     140
NYMEX CRUDE       JUN9    61.63   -0.49   61.47   62.10   50252

Palm oil prices in Malaysian ringgit per tonne
CBOT soy oil in US cents per pound
Dalian soy oil and RBD palm olein in Chinese yuan per tonne
India soy oil in Indian rupee per 10 kg
Crude in US dollars per barrel

(US$1 = RM4.1500)
(US$1 = 69.8825 Indian rupees)
(US$1 = 6.8085 Chinese yuan)