The daily drop is due to pressure from stronger ringgit and tight competition from rival vegetable oils
by BOOMBERG / pic by TMR FILE
PALM oil posted its biggest daily decline in almost four weeks, retreating from a record as a stronger ringgit and tight competition from rival vegetable oils increased pressure on the market.
Futures for December fell 2.9% yesterday, the most since Sept 17. On Wednesday, prices closed at RM5,021 per tonne, the highest ever for the most active contract after India cut import duties for edible oils in a surprise move.
The duty cuts should cool down domestic prices, but since the major demand season is over, they’re not likely to result in more palm oil buying, said Gnanasekar Thiagarajan, head of trading and hedging strategies at Kaleesuwari Intercontinental in Mumbai. On top of that, The US Department of Agriculture estimates that for a record US soybean crop and bigger stockpiles are also weighing on futures, he said.
India’s reduction of import duties and the agricultural cess is positive for all vegetable oil exporters, RHB Research Institute Sdn Bhd analyst Lee Leng Hoe wrote in a note. Still, the duty on crude palm oil is higher than soybean oil, she wrote. With India’s palm oil stockpiles “normalised” and the approach of a post-Deepavali season dip, that could result in some switching to soybean oil in the near future.
The crude palm oil market is taking a breather after the high prices on Wednesday with profit-taking, lower Dalian futures and a higher ringgit all taking their toll, said Sathia Varqa, owner of Palm Oil Analytics in Singapore.
On the technical side, palm oil’s 14-day relative strength index is just below 70, a level indicating the market is overbought, while rival soybean oil’s lower premium is reducing the appeal of palm.