KUALA LUMPUR: Malaysian palm oil futures rose to their highest levels in more than two years on Wednesday, supported by anticipated production declines and policy moves from two top producers.

The benchmark palm oil contract for January delivery on the Bursa Malaysia Derivatives Exchange gained 100 ringgit, or 2.28%, to 4,486 ringgit ($1,031.98) a metric ton at the close. The contract earlier hit 4,514 ringgit, its highest since July 4, 2022.

Malaysia’s export duty tax revision and Indonesia’s increase in palm-based biodiesel mix to 40% are driving prices higher, said Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari.

The Malaysian government last Friday said it will raise the maximum export duty rate to 10% for crude palm oil priced above 4,050 ringgit per metric ton from Nov. 1.

Indonesia’s agriculture minister reaffirmed the country’s plan to implement a 40% mandatory biodiesel mix with palm oil-based fuel, known as B40, starting in January and said the country will work towards implementing B50 in the future.

Palm up on positive export estimates, expectations of weak output

“Production is also expected to decline further in Malaysia and with rising demand, it continues to fuel bullish market sentiment,” Paramalingam said.

Indonesia and Malaysia, the world’s top palm oil producers, together account for about 85% of global palm oil output.

Dalian’s most-active soyoil contract added 2.47%, while its palm oil contract gained 3.48%. Soyoil prices on the Chicago Board of Trade were up 0.05%.

Palm oil tracks prices of rival edible oils as it competes for a share of the global vegetable oils market.

The ringgit, palm’s currency of trade, weakened 0.51% against the U.S. dollar, making the commodity cheaper for buyers holding foreign currencies.

Oil prices fell after industry data showed U.S. crude inventories swelled more than expected.

Weaker crude oil futures make palm a less attractive option for biodiesel feedstock.