VEGOILS-Palm ends two-day decline as floods raise supply worries

  • Reuters
  • Commodities News
VEGOILS-Palm ends two-day decline as floods raise supply worries

* Palm climbs 2% after falling to more than 2-month low

* Market anticipates lower production due to floods

(Updates with closing prices, adds details on 2021 forecast for Indonesia, Malaysia)

By Mei Mei Chu

KUALA LUMPUR, Jan 21 (Reuters) - Malaysian palm oil futures climbed on Thursday, recovering from a near two-and-a-half-month closing low hit in the previous session, as heavy rains and floods in the top two producing countries stoked concerns over output.

The benchmark palm oil contract FCPOc3 for April delivery on the Bursa Malaysia Derivatives Exchange closed up 62 ringgit, or 1.9%, at 3,283 ringgit ($814.64) a tonne.

"Crude palm oil futures snapped two days of steep losses on bargain buying and higher soybean oil close on the Chicago Board of Trade, but mixed Dalian and firmer ringgit were capping gains," said Sathia Varqa, co-founder of Singapore-based Palm Oil Analytics.

Palm oil fell 3.9% in the previous two sessions, settling at its lowest level since Nov. 9 on Wednesday, on worries over declining exports.

Upcoming industry data that is likely to show a fall in production will help sustain prices, Varqa added.

Output in parts of top producers Malaysia and Indonesia has been disrupted as heavy floods and rainfalls delay harvest and crop evacuation.

But industry players and analysts are anticipating production to recover in the second half of the year.

Indonesia's production in 2021 is seen rising 1.8% from the year before to 48.3 million tonnes, while rival Malaysia's production is pegged to rebound by 2.4% to 19.6 million tonnes, a Reuters poll showed. oil prices are forecast to average at 2,800 ringgit ($694.96) a tonne this year, its highest since 2012, according to the poll.

Dalian's most-active soyoil contract DBYcv1 gained 0.6%, while its palm oil contract DCPcv1 fell 0.1%. Soyoil prices on the Chicago Board of Trade BOcv1 were up 0.02%, adding to Wednesday's 2% jump.

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

($1 = 4.0300 ringgit)

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