Palm oil price rallies to eight-year high

Output uncertainty:Some analysts are estimating that Malaysian output will be lowerthan previous estimates because of labour issues.

KUALA LUMPUR: Crude palm oil climbed to an eight-year high of RM3,262 per tonne on concern that a labour shortage in Malaysia will hamper output at a time when dry weather is threatening soybean crops in South America.

Expectations about a drop in palm and sunflower crops, lower soybean ending stockpiles in the US and a dry weather in Brazil are offering a bullish outlook for edible oil prices, said Sathia Varqa, owner of Palm Oil Analytics in Singapore.

“A weaker dollar is also moving soybeans higher, ” he said.

Soybean futures in Chicago traded at their highest since 2016, holding above US$11 a bushel, on deepening concerns about dry weather in Brazil and Argentina.

Farmers in Argentina, the largest exporter of soybean meal and oil, have been stopped in their tracks at the start of the planting season because it’s too dry to sow.

There are also concerns about supplies.

Palm oil output in Malaysia in October appeared to be below the average of 1.89 million tonnes in the past 10 years, Ivy Ng, head of research at CGS-CIMB in Kuala Lumpur, said in a note.

That could be due to the implementation of movement control orders in Sabah state since Sept 29 due to rising Covid-19 cases and a worker shortage, she said.

Sabah is Malaysia’s biggest palm producer.

Rising palm oil prices indicate that demand is higher than supply, said Derom Bangun, chairman of the Indonesian Palm Oil Board.

Some analysts are estimating that Malaysian output will be lower than previous estimates because of labor issues.

Indonesian output could be flat this year, he said.

Supply worries are emerging at a time when demand stays strong. Palm oil imports by India, the largest buyer, probably climbed to a three-month high in October as traders built up stockpiles before the Hindu festival of lights when consumption of fried food increases.

Indian purchases are expected to remain strong amid a gradual recovery in demand from bulk users such as hotels and restaurants that account for 33% of the total consumption, according to G.G. Patel, managing partner of GGN Research.

“Talks about Indonesia raising levy made consumers speeding up buying, ” Bangun said.

It appears that Indonesia is committed to its biodiesel programme, he added.

Indonesia, the world’s biggest palm oil producer, collects palm oil export levies through the Oil Palm Plantation Fund Management Agency, which in turn uses the money for biodiesel incentives. — Bloomberg