Palm oil slumps again amid labour constraints

by BLOOMBERG 

PALM oil resumed declines to track losses in rival soy, while investors weighed the tropical oil’s production outlook amid labour constraints.

Futures in Kuala Lumpur closed 3.4% lower after posting the biggest gain since 2009 on Tuesday. Prices have slid in seven of the past eight sessions.

“Palm oil futures on Bursa Malaysia are back to tracking Dalian Commodity Exchange and Chicago Board of Trade soy after decoupling yesterday,” said Sathia Varqa, owner of Palm Oil Analytics in Singapore. Chicago soy oil and soybean are down for a fourth day.

That bearish sentiment will persist in the palm oil market until there’s more clarity on production, he said. Industry players and analysts are revisiting their forecasts for output in Malaysia, the world’s second-biggest grower, as a resurgence in Covid-19 infections there could exacerbate a labour shortage.

Veteran analyst Dorab Mistry said on Tuesday that palm oil is poised for a “very quick, very sharp and very justified” recovery after a sell-off that wasn’t supported by fundamentals. “The bulls can still have their day, probably in the next few weeks and certainly in July,” he said at a seminar.

Investors are also watching if falling prices would invigorate demand from China and India, Varqa said. Malaysian exports from June 1-15 shrank 3.8% from the previous month, easing from a 10% drop in the first 10 days, as shipments to China rose, according to Intertek Testing Services.