Palm nears two-week peak on slower production, soyoil gains

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KUALA LUMPUR (March 22): Malaysian palm oil futures hit a near two-week high on Wednesday, marking a second straight day of gains amid an uncertain production outlook and forecasts for a soyoil rally.

Palm oil production typically rises in March from February. However, industry players are uncertain about how much production will pick up this month as palm oil trees still face the brunt of a crop-damaging El Nino, which reduces yields of fresh fruit bunches.     

Benchmark palm oil futures for June delivery on the Bursa Malaysia Derivatives Exchange closed up 0.7% at RM2,829 (US$639) a tonne. Earlier in the session, they hit RM2,839 a tonne, their highest since March 9.

Traded volumes for the day totalled 40,762 lots of 25 tonnes each.

Also supporting palm oil were expectations for a rise in soyoil prices after 2017 US biofuel requirements came into effect.

"The market is most likely anticipating a soyoil rally later, and this stage of our production is still slow, providing some short-term support," said a futures trader from Kuala Lumpur. He expects the market to be range bound until the end of the month.

Malaysian palm oil exports fell between March 1 and March 20 compared with a month ago. Cargo surveyor Intertek Testing Services reported a 3% drop, while Societe Generale de Surveillance saw a decline of 7.9%.

Palm oil is expected to break resistance at RM2,810 per tonne and rise towards the next resistance at RM2,880, said Wang Tao, a Reuters market analyst for commodities and energy technicals.

Palm oil prices are also affected by movements in related vegetable oils. Soybean oil on the Chicago Board of Trade was up 0.03%, while the September soybean oil contract on the Dalian Commodity Exchange fell 0.3%.

The September contract for palm olein on the Dalian Commodity Exchange gained 0.4%.

Palm, soy and crude oil prices at 1041 GMT

Contract          Month    Last  Change     Low   High   Volume
MY PALM OIL       APR7     2975   +7.00    2964   2987      876
MY PALM OIL       MAY7     2892  +19.00    2866   2906     4410
MY PALM OIL       JUN7     2827  +20.00    2797   2839    21970
CHINA PALM OLEIN  SEP7     5646  +24.00    5622   5682   550390
CHINA SOYOIL      SEP7     6486  -18.00    6476   6540   387230
CBOT SOY OIL      MAY7    33.17   +0.03   32.93  33.29     5403
INDIA PALM OIL    MAR7   536.40   +0.50  531.30  538.7      628
INDIA SOYOIL      APR7    650.8   +2.25     648  654.3    34440
NYMEX CRUDE       MAY7    47.53   -0.71   47.42  48.24   125817

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 = RM4.4250)
(US$1 = 65.4550 Indian rupees)
(US$1 = 6.8865 Chinese yuan)