Malaysian palm oil futures on Monday rose slightly at the close of trade, recovering from the previous session's losses, as gains in stronger-performing soyaoil boosted sentiment. However, palm's gains are expected to be limited. Traders expect a stronger ringgit and the forecast of better output to curb gains.
A stronger ringgit, palm's traded currency, typically makes the tropical oil cheaper for holders of foreign currencies. The ringgit hit its strongest in nearly seven months on Monday. It was last up 0.4 percent at 4.2620 per dollar. The benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange was up 0.1 percent at 2,499 ringgit ($586.34) a tonne at the midday break.
Traded volumes stood at 25,368 lots of 25 tonnes each at Monday's close. "Palm recovered in line with its higher-performing rival oilseed soya," a Kuala Lumpur futures trader said, referring to soyaoil traded on the Chicago Board of Trade and the Dalian Commodity Exchange. Palm oil prices are typically impacted by the movements of soyaoil, as both the vegetable oils compete for a share in the global edible oils market.
Soyabean oil on the Chicago Board of Trade rose 0.3 percent, while the September soyabean oil contract on the Dalian Commodity Exchange gained 0.5 percent. "We believe sentiment has been weakened by the stronger ringgit and in anticipation of higher production as we approach the second half of the year," said another futures trader in Kuala Lumpur.
Palm oil production is seen rising in the second half of this year in line with the seasonal trend, and as it recovers from the crop-damaging effects of a dry weather El Nino which hit trees in 2015. Malaysian output for April rose 5.7 percent from March to 1.55 million tonnes, according to industry regulator data earlier this month. In other related oils, the September contract for palm olein was up 0.3 percent.
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