Malaysian palm oil prices fall to nearly three-week low

Malaysian palm oil futures fell more than 1% on October 29, reaching their lowest level in nearly three weeks amid weaker rival vegetable oil prices and concerns over rising inventories. The January contract on the Bursa Malaysia Derivatives Exchange declined by 69 ringgit, or 1.47%, to 4,616 ringgit ($1,131.32) per ton. This was the lowest closing price since October 9. Prices fell for a fourth consecutive trading session.

The main pressure on the market came from declining prices of competing vegetable oils. On the Dalian Commodity Exchange, soyoil futures fell 0.71%, while palm oil futures dropped 2.38%. Meanwhile, soyoil futures on the Chicago Board of Trade (CBOT) lost 1.46%. Palm oil is sensitive to price movements in other vegetable oil markets, as it competes with them for demand from the food industry and biofuel producers.

Additional downward pressure came from traders’ concerns over a potential increase in Malaysia’s end-October palm oil stocks. Market participants expect production to rise in the near term, which could increase supplies. Meanwhile, the absence of a decision to remove Malaysia’s crude palm oil export duty is weighing on buyer sentiment and creating further market uncertainty.

Prices were also affected by a decline in global crude oil prices, which gave up some of the previous day’s gains amid hopes for peace talks and easing concerns over supply disruptions from the Middle East. Lower crude oil prices reduce the attractiveness of palm oil as a feedstock for biodiesel production, potentially weakening demand from the biofuel industry.

Additional pressure on export prices came from a 0.42% strengthening of the Malaysian ringgit against the US dollar. As palm oil is traded in ringgit, a stronger local currency makes the commodity more expensive for foreign buyers. Further price movements will depend on production trends and stock accumulation in Malaysia, developments in competing vegetable oil markets and changes in global crude oil prices.

Tags: Malaysia, palm oil