Palm oil prices extend gains on supply woes after Malaysia floods

Crude palm oil prices rose for the second day supported by concerns about supply following floods in Malaysia and persisted labour shortages.

Crude palm oil futures for March on the Malaysia Derivates Exchange rose 0.14% to MYR4,866 per tonne on Tuesday. The futures gained 3.34% to hit MYR4,854/tonne on Monday, the first trading day in 2022, according to Palm Oil Analytics.

“There are floods, labour shortage, hike in fertilizer prices, and seasonal dip in production,” Paramalingam Supramaniam, executive director at Pelindung Bestari, a brokerage in Selangor, Malaysia told Capital.com.

Production problems

The Strait Times reported heavy rains on Sunday caused floods in seven states in Malaysia, the world’s second-largest producers of the reddish vegetable oil, and forced more people to evacuate to shelters.

As of Sunday, the seven states affected by floods are Kelantan, Terengganu, Pahang, Johor, Melaka, Negeri Sembilan and Sabah, according to the Strait Times. All seven are Malaysia’s key palm oil-producing states.

Malaysia has also been struggling with foreign labour shortage caused by restrictions to limit the spread of Covid-19. While the government is expected to issue permit for more than 30,000 foreign workers to work at the plantations, analysts have said that it may take some time for them to arrive.

Eyes on January data

Market is also waiting for the release of Malaysia’s palm oil production data on 10 January by the Malaysian Palm Oil Board (MPOB).

“According to a preliminary polls major plantations December output plunged around 10%-15%, and with floods wreaking havoc all eyes will be glued on to January production numbers,” said Paramalingam on a Twitter.

Malaysia’s palm oil output dropped 5.27% in November at 1.63 million tonnes, from 1.72 million tonnes in October, according to data from MPOB.

Capital.com

Tags: prices, Malaysia, palm oil