Malaysian palm oil futures ended higher on Wednesday driven by supply concerns after Malaysia extended its restricted movement order a day after suspending some palm operations, and as higher soyaoil prices lended support.
The benchmark palm oil contract for June delivery on the Bursa Malaysia Derivatives Exchange closed up 34 ringgit, or 1.44%, to 2,387 ringgit ($543.74) per tonne.
The contract surged as much as 3% during the session after Malaysia announced that it will extend its 14-day restricted movement order to a month.
Palm had gained 2.71% on Tuesday on news that Malaysia’s largest palm oil producing state, Sabah, ordered the temporary closure of plantations and factories in three districts after seven workers tested positive for the virus.
The closure may affect up to 50% of planted area in the state and reduce March production figure by 2.8%, or 39,500 tonnes, said Ivy Ng, regional head of plantations research at CGS-CIMB, in a note to clients.
“However, should planters that operate in these districts be allowed to resume work from April 1, they will be able to recover some of the unharvested fruits, which could flow into production figures in April,” Ng said. Malaysia’s March 1-25 exports fell between 11.7% and 13.6% on weak demand due to global lockdowns, according to data by cargo surveyors on Wednesday.
Also stoking demand concerns was India, the world’s largest edible oil consumer, ordering a 21-day lockdown to tackle the coronavirus.
Palm oil production in Indonesia, the world’s top palm producing nation, is expected to rise to 43.5 million tonnes in 2020/21, while palm oil exports are expected to fall due to the pandemic, according to a US Department of Agriculture attache in Jakarta.
Dalian’s most-active soyaoil contract gained 2.15%, while its palm oil contract jumped 4.47%. Soyaoil prices on the Chicago Board of Trade rose 0.8%. Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.
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