07.01.2021 (www.brecorder.com) - KUALA LUMPUR: Malaysian palm oil futures rallied over 3% on Wednesday, hitting near a 10-year high on forecast of a deep cut in December supply and tracking strength in rival soyaoil prices.
The benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange settled up 122 ringgit, or 3.2%, at 3,877 ringgit ($967.32) a tonne.
The contract rose for a sixth straight session and hit its highest since Feb. 14, 2011.
Malaysia’s palm oil stocks likely fell 23% month-on-month to 1.21 million tonnes at end-December due to higher exports and declining output, CGS-CIMB Research said in a note.
Palm prices will remain supported in January due to the projected low inventory and potential supply disruption from flooding in some parts of Malaysia, but supply is expected to recover in the second half of the year when weather normalises, it said.
However, the current high prices may curb consumption, Adrian Kok, an equity analyst at Kenanga Investment Bank said in a note.
Weather disruption and labour shortages mean global palm oil production is unlikely to stay on trend to hit growth projections of more than 6 million tonnes this year, leading analyst James Fry said at a virtual conference.
Dalian’s most-active soyaoil contract rose 2%, while its palm oil contract gained 3%. Soyaoil prices on the Chicago Board of Trade were up 2%.
Dry growing conditions in South America are stoking worries of soyabean yield losses.
Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.
Oil prices rose to their highest since February 2020 after Saudi Arabia agreed to reduce output more than expected in a meeting with allied producers, making palm a more attractive option for biodiesel feedstock.—Reuters