Malaysian Palm Oil Futures Show Stability Amidst Concerns over Demand and Weather
Malaysian palm oil market demonstrated a steady performance on Thursday, remaining within a narrow trading range. Traders carefully assessed the impact of larger stockpiles in May alongside concerns surrounding weakened demand and the adverse effects of dry weather on production.
Analyzing the Palm Oil Market
During early trade, the benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange witnessed a modest gain of 5 ringgit, equivalent to 0.14%, reaching 3,457 ringgit ($746.49) per metric ton. While Malaysian Palm Oil Exports as seen in the table below shows bearish tone.
|Malaysia 1-15 May 2023 vs. 1-15 June 2023 export (in ton)|
|577,090||464,380||(-92,710 or down 16.64%)|
|AS PER AMSPEC REPORT|
|523,042||437,101||(-85,941 or down 16.43%)|
Impact of India’s Palm Oil Imports
However, India, a significant importer of palm oil, experienced a decline in palm oil imports in May. According to a trade body, imports fell by approximately 14% compared to the previous month, amounting to 439,173 tonnes. In contrast, imports of soyoil increased by approximately 22% to 318,887 tonnes, while imports of sunflower oil rose by 18.5% to 295,206 tonnes. These statistics were reported by the Mumbai-based Solvent Extractors’ Association of India (SEA).
Anticipating the EPA’s Biofuel Blending Rule
Meanwhile, U.S. Environmental Protection Agency (EPA) is set to release its final rule regarding biofuel blending volume mandates for the years 2023-2025. A court document stated that the EPA, after requesting a one-week extension on the deadline, is expected to unveil the rule by June 21. Market participants eagerly await this announcement, which has contributed to a sense of unease within the market. The dry weather conditions in the U.S. Midwest have further amplified concerns, leading many traders to close their short positions before potential crop deterioration.
Impact of Soy oil Prices and Dalian Exchange
On the Chicago Board of Trade, soyoil prices experienced a slight decrease of 0.25%. However, they had risen by 2.8% overnight due to apprehensions about crop conditions in the U.S. Midwest, where dry weather prevails. In contrast, Dalian’s most-active soyoil contract observed a gain of 1.7%, while the palm oil contract rose by 3.2%. These developments in the prices of related oils have a significant impact on palm oil, as they compete for market share within the global vegetable oils market.
Challenging Weather Conditions in Malaysia
Additionally, Malaysia’s palm oil production for June has been affected by hot and dry weather conditions. This unfavorable climate has caused a slowdown in the production process, exacerbating concerns within the industry. Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari, highlighted the impact of these conditions.
Assessing Shipment Data and Russia’s Grain Deal
Cargo surveyors are scheduled to release the shipment data for June 1-15 from Malaysia on Thursday. This information will provide valuable insights into export performance during this period. Earlier this week, reports from Intertek Testing Services and Amspec Agri indicated a decline in exports ranging from 16.7% to 17.6% during June 1-10.
Meanwhile, President Vladimir Putin of Russia recently expressed considerations about withdrawing from the Black Sea grain deal. The decision to potentially terminate the agreement stems from Moscow’s dissatisfaction with the West’s failure to fulfill its promises of facilitating Russian agricultural goods’ access to global markets.
The Malaysian palm oil futures market exhibited stability amid contrasting factors affecting the industry. Traders closely monitored the impact of larger stockpiles, weakened demand, dry weather conditions, and global market dynamics. As the industry continues to adapt to evolving circumstances, market participants eagerly await crucial announcements from regulatory authorities and closely analyze the performance of related commodities.