Malaysian palm oil futures rose for a second trading day to reach a new 20-month high on Wednesday as traders forecast lower palm oil output in February due to the Lunar New Year public holidays. The palm oil contract for April on the Bursa Malaysia Derivatives Exchange had gained 1.3 percent to 2,547 ringgit ($603.70) per tonne at the end of Wednesday. It earlier reached an intraday high of 2,551 ringgit, its strongest level since May 19, 2014.
Traded volume stood at 60,141 lots of 25 tonnes each. "Production was down last month and this month is expected to be down again," said a trader from a palm oil brokerage in Kuala Lumpur. "There is Chinese New Year, so there are fewer harvesting days, coupled with other public holidays plus fewer calendar days in February."
Palm oil output in top producers Malaysia and Indonesia is seeing a decline in line with the seasonal trend, and as the dry weather impact from the El Nino last year kicks in. A weaker ringgit on Wednesday could have also lent support to palm, as this makes the vegetable oil cheaper for holders of foreign currencies. The ringgit, the currency palm is traded in, lost 0.3 percent to reach 4.2190 per dollar on Wednesday as investors weigh in concerns over falling oil prices and allegations surrounding Malaysia's debt-laden state fund 1Malaysia Development Berhad (1MDB). In competing vegetable oil markets, the US March soyoil contract gained 0.6 percent, while the May soybean oil contract on the Dalian Commodity Exchange rose 0.3 percent.
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