Palm oil surges

Malaysian palm oil futures snapped a five-day losing streak on Wednesday as the ringgit slid to its weakest in six years, although gains were capped by palm's narrowing discount to rival soyoil. The Malaysian ringgit touched a low of 3.7170 per dollar on Wednesday as Asian markets skidded on worries about an US interest rates hike sooner than expected, sending the dollar to a 12-year high against the euro.
By the end of the day the ringgit had recovered slightly, rising 0.08 percent to 3.6970 per dollar. A weaker Malaysian currency makes the ringgit-priced feedstock cheaper for foreign investors. Despite the weak currency, traders said some buyers were reluctant to book palm because its once wide discount to soyoil has been largely shaved off. "With the weak ringgit, it should encourage more exports," said one trader with a foreign commodities brokerage in Kuala Lumpur.
"But it's not showing up on the export data yet. The reason is that the spread between palm and soy has narrowed, and people are trying to buy more soy than palm," the trader added. Palm olein's discount to Argentina soyoil is currently about $32, versus $27 earlier in March and $128 at the start of 2015. By Wednesday's close, the benchmark May contract on the Bursa Malaysia Derivatives Exchange had edged up 1.74 percent to 2,276 ringgit ($616) a tonne, rising for the first time after a downtrend over the past five days.
Total traded volume stood at 42,575 lots of 25 tonnes, above the average 35,000 lots. Export data from cargo surveyors on Tuesday showed that Malaysian palm oil shipments in the first ten day of March was between 12 and 19 percent weaker from the same period in February, with between 247,698 tonnes and 262,168 tonnes exported. Industry regulator data meanwhile showed that Malaysian palm inventories at end-February shrank to their smallest in seven-months. Exports for the month, however, were at their weakest in nearly eight years. In vegetable oil markets, the most active May soybean oil contract on the Dalian Commodity Exchange fell 0.55 percent, while the US soyoil contract for March rose 0.26 percent. Elsewhere, Brazilian government crop supply agency Conab trimmed its forecast for the 2014/15 soybean harvest to 93.3 million tonnes from its February outlook of 94.6 million tonnes. The estimates are still seen at a record, well above last year's 86.1 million tonnes.