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Palm oil closes down amid rising production
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Summarized by durumis AI
- Malaysian palm oil futures prices rose, but gains were capped by rising production and a weaker ringgit, as well as expectations of improved demand.
- Malaysia’s palm oil production in May increased while exports declined, possibly due to the economic slowdown in major importing countries.
- A weaker ringgit provides an opportunity for exporters to raise prices, but technical analysts predict that the decline in palm oil prices is not over, targeting a range of 3,812-3,832 ringgit/tonne.
Malaysian palm oil futures prices rose today. This isdue to the recovery in production offsetting the weakness of the ringgit and expectations of improved demand for palm oil.BMD's August palm oil futures rose to 3,932 ringgit in morning trading on Friday, before closing down 8 ringgit at 3,886 ringgit.
Malaysian palm oil production is expected to increase significantly in May, while export volumes have been weak for the first three weeks. In fact, exports from May 1 to 20 declined by 8.3% to 9.6% from the previous month. This decline in exports could be attributed to several factors, one of which could be the slowing economic growth in major importing countries and the resulting decline in demand.
The Malaysian ringgit's value has weakened against the US dollar, making palm oil more attractive to overseas buyers. Until recently, palm oil had been losing market share due to its high price compared to soya oil and sun oil, butit is currently being sold at a lower price than competing oils, regaining market share. This indicates that Malaysia's palm oil's position in the global market is strengthening due to its regained price competitiveness.
Meanwhile,prices of soya oil, sun oil, and rapeseed oil have risen this week due to concerns about production. US soya oil futures rose 0.22% on Friday morning. This is related to weather issues in major US production areas and reflects the uncertainty surrounding production due to climate change.
Brazil's Rio Grande do Sul state has been hampered by rainfall and flooding this week, disrupting fieldwork. However, farmers in the area have harvested soybean in 91% of the total area. This shows that Brazilian farmers are maintaining high productivity despite the adverse weather conditions.
The weakening Malaysian ringgit is providing an opportunity for exporters to increase prices, and palm oil exports are expected to improve in the coming weeks. However, according to Reuters technical analyst Wang Tao, palm oil prices have not yet bottomed out and are targeting 3,812-3,832 ringgit/ton. This suggests that the market remains volatile and there may be further price adjustments in the short term.
