SINGAPORE, Aug 21: Malaysian palm oil futures edged lower on Wednesday, tracking a softer soy market, although losses were trimmed as a weaker ringgit fuelled hopes of greater demand for exports.
The U.S. Soy market edged lower after a tour of the grain belt pegged higher crop yields, putting pressure on palm oil as demand could ease due to a higher supply of competing soybean oil.
But traders said demand may be spurred by weak currencies in major producers Indonesia and Malaysia, which makes palm exports cheaper for overseas buyers and refiners, especially as China restocks ahead of September’s Mid-Autumn festival.
The Malaysian ringgit slid to its lowest in more than three years against the dollar on Tuesday, while the Indonesian rupiah hit a fresh four-year low.
‘The palm market is quite volatile today. In the early morning it was weighed down by U.S. Soybeans but we saw some recovery,’ said a trader with a foreign commodities brokerage in Kuala Lumpur.
‘While the weaker (Indonesian) rupiah could stimulate more overseas demand, don’t forget that the ringgit is also getting weaker, so in a way both countries may benefit. Malaysian exports could reach 1.4 million tonnes this month, with China buying ahead of the festival season.’
By the midday break, the benchmark November contract on the Bursa Malaysia Derivatives Exchange had lost just 0.1 percent to 2,326 ringgit ($707) per tonne, after trading in a tight range between 2,311 and 2,339 ringgit.
Total traded volume stood at 12,210 lots of 25 tonnes each, in line with the usual 12,500 lots.
Technicals showed palm oil looks neutral in a range of 2,287-2,366 ringgit per tonne, and an escape will give a future direction, said Reuters market analyst Wang Tao.
Indonesia, the world’s top palm oil producer, has cut its export tax for crude palm oil to 9 percent for September down from 10.5 percent in August, an industry ministry official said on Wednesday.
The country’s July exports of crude palm oil and its derivatives fell 1.64 percent to 1.59 million tonnes compared with the previous month, an industry body said on Wednesday, due to falling demand from India and China.
In contrast, Malaysia’s palm exports in July inched up as much as 5.3 percent to 1.39 million tonnes from a month ago, cargo surveyor data showed.
In other markets, Brent crude eased for a third session out of four to trade under $110 a barrel on Wednesday, reflecting caution among investors waiting for more clues from the U.S. Federal Reserve on its stimulus strategy.
In vegetable oil markets, the U.S. Soyoil contract for December edged up 0.1 percent in early Asian trade. The most-active January soybean oil contract on the Dalian Commodities Exchange fell 0.7 percent.
(AGENCIES)
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