“The adverse weather in Malaysia is likely to hamper production in the upcoming months; it may cause some disruption to harvesting as well as complicate logistics,” Tan Chee Tat, an analyst at Phillip Futures Pte, said by phone in Singapore.
“Because of the kicking in of the monsoon season and the end of the high-production cycle, we’re expecting production to slow.”
Isolated showers and thunderstorms are predicted over Sabah, Sarawak and Johor, the biggest palm oil producing states, according to a seven-day outlook on the Malaysian Meteorological Department’s website.
Eoin Treacy's view Palm Oil and soybean oil occupy the two largest positions in terms of vegetable oil supply globally but palm oil represents more of an international market and Malaysia is the swing producer. Increasing demand both for food and biodiesel has resulted in considerable investment in additional supply over the last decade. Meanwhile, development of natural gas resources in Australia and East Africa are contributing to increased LNG cargoes and competition as a relatively eco-friendly fuel.
Palm Oil broke above MYR 2500 today and may be in the process of completing a yearlong base. A clear countermanding downward dynamic would be required to question that view.
Soybean Oil has been trending lower for most of the year and had developed an oversold condition relative to the 200-day MA when it found at least short-term support in the region of 40¢ from early this month. While some short-term scope for additional mean reversion exists, a sustained move back above 45¢ is required to break the medium-term progression of lower rally highs.
I created this spread of Soybean Oil – Palm Oil adjusting for currency and converting both to ¢/lbs. The spread encountered resistance at the upper side of a lengthy range from late 2012 and accelerated lower over the last six months, unwinding the premium of soybean oil to palm oil. As the spread approaches the lower side of the lengthy trading range, the first clear upward dynamic is likely to signal a return to outperformance by soybean oil and may coincide with a move above 45¢.