Palm oil prices are falling due to a drop in exports and a rise in production

Malaysian palm oil futures declined for a third consecutive session on August 27, pressured by weak export demand, expectations of higher production and lower crude oil prices. The benchmark November contract on Bursa Malaysia fell 0.78% to 4,814 ringgit ($1,194.54) per ton.

According to cargo surveyors, Malaysian palm oil product exports during August 1–25 fell by 11.4–20% compared with the same period in July. At the same time, production was stronger than expected, while recent rains could further support output.

Prices also came under pressure from weaker crude oil amid expectations that shipping through the Strait of Hormuz could resume. Lower crude oil prices reduce the attractiveness of palm oil as a feedstock for biodiesel production.

Palm oil has also lost some of its price competitiveness against soybean oil. On the Dalian exchange, soyoil futures rose 0.78%, while palm oil gained 0.06%. In Chicago, meanwhile, soyoil prices fell 1.86%.

Analysts say weak exports, rising production and lower energy prices remain the main bearish factors for the market. However, longer-term supply could face risks from potential production losses next year due to fire hotspots in Indonesia’s Kalimantan region.

Tags: prices, Malaysia, palm oil, futures