Palm oil prices rise on concerns over El Niño impact on production

Malaysian palm oil futures ended the week higher amid concerns over the potential impact of El Niño on production in Malaysia and Indonesia. The November contract on Bursa Malaysia rose 0.55% on September 4 to 4,931 ringgit ($1,220)/t, gaining 0.76% over the week.

Prices were supported by expectations of a potential reduction in palm oil supply in the medium term. Market participants are concerned that weather conditions associated with El Niño could negatively affect production in the world’s two largest producers, Indonesia and Malaysia.

Meanwhile, other vegetable oil markets moved lower. The most-active soyoil contract in Dalian declined 0.19%, while its palm oil contract fell 0.39%. Chicago soyoil futures were down 0.46%.

Lower crude oil prices also put pressure on palm oil. Cheaper crude oil makes palm oil less attractive as a biodiesel feedstock, although concerns over energy supplies in the Middle East continue to support the crude oil market.

Meanwhile, Indonesian state-owned plantation company Agrinas Palma Nusantara plans to increase palm oil production to 1.5 mln tons next year. Indonesia is also working to establish a new commodities exchange aimed at strengthening the country’s role in setting prices for its key commodities.

Tags: Indonesia, prices, Malaysia, palm oil, futures, Эль-Ниньо