Palm oil capped its first weekly gain in three as demand recovered ahead of the Ramadan festival and a U.S. crop planting forecast fell short of expectations, renewing concerns over a global edible oil supply squeeze.
Exports of palm oil from Malaysia, the world’s No. 2 grower, jumped by more than a quarter in March from a month earlier amid stronger demand from India, Europe and Africa, according to cargo surveyors Intertek Testing Services and AmSpec. That’s brightened the demand outlook of the tropical oil used in everything from margarine to chocolate and detergent.
Meanwhile, the U.S. Department of Agriculture’s planting outlook stunned market participants with a smaller-than-expected forecast for soybeans, triggering a rally in grains and soyoil that spilled over to palm oil, its closest substitute.
The rebound in shipments in March and positive sentiment from the U.S. farmers’ planting intention report is supporting palm oil, according to Paramalingam Supramaniam, director at Selangor-based broker Pelindung Bestari.
“The market is anticipating April exports to be a tad better versus March,” he said. “With tight end-stocks and better-than-expected exports, prices are expected to remain firm.”
Futures swung on Friday before closing 0.1% lower, paring weekly gains to 1.3%.
Still, concerns over a big jump in palm yields are keeping investors on their toes. Despite labor shortages on Malaysian estates, production climbed 20% over March 1-20 from a month earlier, according to an estimate from the Malaysian Palm Oil Association.
This story was produced with the assistance of Bloomberg Automation.