Palm oil drops 2% on signs of progress in Russia-Ukraine talks

March 30, 2022: Malaysian palm oil futures fell on Wednesday, giving up gains from the previous session, after signs of progress in Russia-Ukraine peace talks raised hopes of an end to a conflict that has roiled global supply of commodities, including edible oils.

The benchmark palm oil contract FCPOc3 for June delivery on the Bursa Malaysia Derivatives Exchange slid 130 ringgit, or 2.16%, to 5,890 ringgit ($1,400.05) a tonne during early trade.

FUNDAMENTALS

Crude and soyoil prices fell overnight after Russia promised on Tuesday to scale down military operations around Kyiv and another city but the United States warned the threat was not over as Ukraine proposed adopting a neutral status in a sign of progress at face-to-face negotiations. 

Indonesia set its crude palm oil reference price for April at $1,787.5 per tonne, up from March's $1,432.24 per tonne, a trade ministry regulation showed. 

Oil prices climbed, erasing sharp losses from Tuesday, as focus turned to supply tightness.

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

Soyoil prices on the Chicago Board of Trade BOcv1 were down 0.5%. Dalian's most-active soyoil contract DBYcv1 fell 0.9%, while its palm oil contract DCPcv1 slipped 1%.

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

MARKET NEWS

Asia shares joined a global rally, as hopes rose for a negotiated end to the Ukraine conflict, while bond markets signalled concern overnight that aggressive rate hikes could damage the U.S. economy after 10-year yields briefly dipped below two-year rates.