Palm Oil Slips From Two-year High

Malaysian palm oil futures slipped on Tuesday as commodities traders to took profits after recent gains that saw it trading at a price above its two years high.

The palm oil that would be delivered to buyers in June on the Bursa Malaysia Derivatives Exchange fell 0.5 percent to reach 2,748 ringgit (US$687) per tonne by midday. It earlier rose to match Monday’s intra-day high of 2,764 ringgit, the strongest since March 21, 2014. Traded volumes were 14,969 lots of 25 tonnes each.

The ringgit, the currency palm oil is traded in, strengthened by 0.3 percent against the dollar to reach 4.0005 around noon. A stronger ringgit makes palm more expensive for foreign currency holders.

According to reports,“Palm fell on ringgit strength, and technically the market was overbought. Profit taking emerged”.

Palm has surged 2.8 percent since Thursday’s close, over concerns that a drought cause by the El Nino weather pattern would impact fresh fruit yields. The El Nino, which normally brings scorching heat across Southeast Asia, may lower Malaysia’s annual palm output by 2 million tonnes in the oil year ending September 2016, said a leading industry analyst.

Malaysia is the world’s second-largest palm producer, after Indonesia.

Palm oil may break a support at 2,729 ringgit per tonne and fall towards the next support at 2,695 ringgit, as it failed to break a resistance at 2,776 ringgit, according to Reuters market analyst for commodities and energy technicals Wang Tao.

In competing vegetable oil markets, the May Chicago Board of Trade soy oil contract fell 0.1 percent, while the September soybean oil contract on the Dalian Commodity Exchange gained 0.2 percent.

Palm oil is a commodity which the federal government of Nigeria would be looking at as an alternative to generate foreign exchange with its potential of exporting an annual output of over 2 million tonnes. Malasia gots its initial palm oil seedling from Nigeria in the late seventies.