Palm starts new year with 2% jump

January 3, 2022: Malaysian palm oil futures climbed on Monday to start the new year on a strong note, bolstered by expectations of tight production in the first half of 2022.

The benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange gained 100 ringgit, or 2.13%, to 4,797 ringgit ($1,150.64) a tonne in early trade.

Palm logged its third straight annual gain last week, rising 30.7% in 2021 as a pandemic-fuelled labor shortage hampered output in the world's second-largest producer while demand picked up after countries eased lockdowns. Prices are set to average around 4,149.57 ringgit ($995.34) this year.

FUNDAMENTALS

Concerns about floods affecting production are likely to set in and cushion selling activities seen last week, a Kuala Lumpur-based trader said.

Soyoil prices on the Chicago Board of Trade were up 0.58%. The Dalian Commodity Exchange is closed on Monday for the new year holiday.

Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.

Palm prices are expected to stay strong in 2022 as production will remain constrained due to soaring fertilizer costs and long-standing labor shortages, the Council of Palm Oil Producing Countries said last week.

Oil prices rose as the market kicked off 2022 on a positive note, although concerns over demand waning due to rapidly spreading COVID-19 pandemic limited gains.

Stronger crude oil futures make palm a more attractive option for biodiesel feedstock.

Palm oil remains neutral in a range of 4,676 ringgit to 4,751 ringgit per tonne, and an escape could suggest a direction, Reuters technical analyst Wang Tao said.

Reuters