Palm oil draws late buying ahead of possible ringgit spike after British vote

Malaysian palm oil futures steadied in late trade on Thursday, recovering earlier losses as some traders bought palm before a possible spike in the ringgit if Britain votes to stay in the European Union. The ringgit and other emerging market currencies have been hit by recent volatility in global financial markets on nervousness about the economic impact if Britain votes to leave the EU in a referendum on Thursday.
Final opinion polls were mostly too close to call, however, some gave a vote to stay in the bloc a slight edge. "Traders usually square their positions ahead of a major announcement," one trader said, adding that the market was expecting Britain to stay in the EU. A rising ringgit, the currency of trade for palm oil, makes the vegetable oil more expensive for foreign currency holders. Palm fell earlier in the day on expectations for rising production and lower exports this month.
Benchmark palm oil futures for September delivery on the Bursa Malaysia Derivatives Exchange rose 0.4 percent to 2,384 ringgit ($594) per tonne at the close of trade, after earlier hitting a six-month low of 2,351 ringgit. Traded volumes stood at 68,271 lots of 25 tonnes each in late trade, higher than the 2015 daily average of 44,600 lots. "The continuous fall has resulted in most technicals being terribly oversold," said a Kuala Lumpur-based trader.
"The uncertainty over global events post Britain's vote also played a pivotal role in the prices ending higher." Palm declined for nine consecutive sessions before paring losses on Friday. It fell for another two sessions this week on poor fundamentals. Palm industry participants forecast higher June output versus a month ago, as fresh fruit yields increase in line with the growing season. Production typically reaches its peak in the third to fourth quarter of the year.
Exports, however, are expected to decline this month after demand surged in May on Ramazan orders. Malaysian palm oil shipments fell between 8 percent and 10 percent in the first 20 days of June on sharp declines of exports to India, the world's largest consumer country of palm. In competing vegetable oils, the Chicago Board of Trade soyoil contract for July rose 0.3 percent, while the September soybean oil contract on the Dalian Commodity Exchange gained 0.1 percent. The offer price for crude palm kernel oil was at 5,241.47 ringgit per tonne in late trade, according to price assessments by Thomson Reuters.