The downward trend continues in Palm oil markets. Global prices eased for yet another week. On Friday Malaysian Palm oil registered its second weekly loss, with the benchmark palm oil contract for April delivery losing down 5 ringgit, over previous close on the Bursa Malaysia Derivatives.
Poor numbers for the January exports data for Malaysian palm oil continued pressuring prices. On weekly basis Palm futures of Malaysia are down 4.2 per cent for the week.
Sentiments have weakened after cargo surveyors reported a 43 per cent fall in January 1-20 exports from the same period last month.
Export demand has decreased of late mainly because of record high prices on palm oil. Edible oils like soybean oil and palm oil had nearly doubled versus March 2020 offers by end of December 2020.
News of lockdown resuming in Malaysia had added to the negative on worries of trade related disruption as border trades may be restricted for a while. A movement control order (MCO) in six Malaysian states and federal territories which was to expire on Jan 26 is to be extended to Feb 4, The affected areas are the states of Penang, Selangor, Johor, Sabah, Malacca and Kelantan, and the federal territories of Putrajaya, Kuala Lumpur and Labuan.
The decision was made based on the risk assessment and advice of the health ministry after finding that daily COVID-19 cases were still on the rise in the states.
India and China are biggest buyers of palm oil therefore unless demand improves from these nations, palm oil prices in Malaysia or Indonesia are expected to remain under pressure.
However, from a broader perspective it is unlikely that prices may see any significant fall from current levels as the ongoing lockdown restrictions will result in lower production as plantations will be affected.
As prices are turning cheaper there are chances of Indian and Chinese importers to step in for fresh purchases soon.
Besides, there are reports of few regions under water logging conditions due to the recent heavy rains and floods. Since this will negatively impact harvesting and crop-evacuation activities, possibility of yield and output losses shall increase.
Also, there are speculations of top producer and competitor Indonesia, to hike its export tax and levy for crude and refined palm products for February. Under this situation, Malaysian palm oil shall be cheaper then Indonesian palm oil, thus turning attractive for the importers.
