Palm oil posts 4% weekly drop as exports continue to dip

Malaysian palm oil futures eased on Friday and logged its second weekly loss, as tepid January exports data so far and weak prices of rival soya oil weighed on sentiment.

The benchmark palm oil contract for April delivery on the Bursa Malaysia Derivatives Exchange closed down 5 ringgit, or 0.15 per cent, to 3,279 ringgit ($811.33) a tonne, after declining 1.8 per cent during the session.

Palm futures slumped 4.2 per cent for the week, adding to the previous session’s deep losses, after cargo surveyors reported a 43 per cent slump in January 1-20 exports from the same period last month.

“Disappointing Malaysian export figures are still lingering in the market, offsetting worries of supply disruption due to heavy rain and floods,” a Singapore-based trader said. “The market is expected to remain on a downtrend until we see an improvement in demand from big buyers such as China and India,” he added.

Export tax

Portions of plantations are “under water” as heavy rains and floods disrupt harvesting and crop-evacuation activities,leading to crop losses, planters based in Malaysia’s biggest palm-producing states of Sabah and Sarawak said. However, speculation of top producer and rival Indonesia raising its export tax and levy for crude and refined palm products for February provided some support.

Higher Indonesian export tax makes cheaper Malaysian palm oil more attractive for traders.