KUALA LUMPUR: The global vegoil market has been building strength since July, but some bearish factors are starting to nudge their way in.
Benchmark Malaysian palm oil futures for January jumped last week on currency and fundamental factors, but they have been weighed down by soy-based competitors, particularly Chicago-traded soyoil and China’s Dalian Commodities Exchange soyoil. (reut.rs/2fspCoA)
Multiple market-moving factors have been at play within the last week, including the U.S. presidential election, the U.S. Department of Agriculture’s monthly supply and demand report, monthly palm oil data from Malaysia, and Tuesday’s expected U.S. soybean crush numbers.
The vegoil with perhaps the most price-supportive case at the moment is palm oil, particularly out of Malaysia, the No. 2 producer. Malaysian palm oil futures have been on the upturn since July. The rally has been assisted by the weakening ringgit, which has been sharply lower since last Wednesday. This makes palm oil cheaper for foreign buyers.
On Thursday, the Malaysian Palm Oil Board revealed both a smaller stockpile and weaker production numbers than the market had expected for the month of October. Production fell 3 percent below analysts’ predictions, while stocks came in 7 percent lower. The latter was bolstered by larger-than-expected exports.
These numbers are sharply lower than a year ago. Last month, Malaysian palm oil production was 18 percent smaller than October 2015, while stocks were down nearly 45 percent over the same time frame. Exports of the tropical oil were 16 percent lower on the year.
The USDA confirmed declining world palm oil reserves in its monthly supply and demand report last Wednesday. Global carryout for both 2015/16 and 2016/17 was revised downward by the U.S. agency, and the latest figure for the current marketing year stands just half a percentage point above last year.
