As Malaysian Palm Oil Futures Decline Amidst U.S. Biofuel Mandate Adjustments
In a recent development, Malaysian palm oil futures experienced a consecutive decline, influenced by the revised biofuel mandate proposed by the United States. The revised plan indicates a smaller biofuel requirement than initially proposed, leading to a negative impact on the market.
Revised U.S. Biofuel Mandate Affects Palm Oil Futures
The benchmark palm oil contract for September delivery on the Bursa Malaysia Derivatives Exchange witnessed a decline of 111 ringgit, equivalent to 2.98%, settling at 3,616 ringgit ($778.81) per metric ton. This downward movement in prices can be attributed to the new U.S. biofuel mandate, which seeks to increase the volume of biofuel blending in the nation’s fuel mix over the next three years. However, the revised plan includes lower mandates for corn-based ethanol compared to the initial proposal.
Malaysia Maintains July Export Tax for Crude Palm Oil
Malaysia, a key player in the palm oil industry, has decided to maintain its July export tax for crude palm oil at 8%. Additionally, the reference price has been lowered, as indicated by a circular on the Malaysian Palm Oil Board website.
Decline in Malaysian Palm Oil Product Exports
The cargo surveyor, Intertek Testing Services, reported a 16.8% decrease in Malaysian palm oil product exports for the period of June 1-20 compared to May. AmSpec Agri Malaysia, another cargo surveyor, also noted a decline of 12.9% in exports. These figures highlight the current challenges faced by the Malaysian palm oil industry.
Ringgit Depreciation Mitigates Losses
The depreciation of the ringgit, the currency used for palm oil trade, has played a role in limiting losses. Against the dollar, the ringgit experienced a decrease of 0.11%, reaching its lowest point since November. This depreciation has made palm oil more affordable for foreign buyers holding other currencies, potentially offsetting some of the negative market impact.
Impact of Related Oils on Palm Oil Market
Palm oil is influenced by price fluctuations in related oils, particularly as they compete for market share in the global vegetable oils industry. Dalian’s most-active soyoil contract experienced a 1.7% decline, while its palm oil contract dropped by 3%. Furthermore, soyoil prices on the Chicago Board of Trade saw a notable decrease of 5.6%.
In conclusion, the Malaysian palm oil market experienced a decline in futures prices due to the revised U.S. biofuel mandate, which includes lower requirements for corn-based ethanol. Additionally, the depreciation of the ringgit and reduced palm oil exports contribute to the challenges faced by the industry. It is essential for stakeholders to closely monitor these developments and adapt their strategies accordingly to navigate the evolving market conditions. So as we said market still trade in 3,200 – 3,800 einggit ranges.
