Malaysian palm oil futures on the Bursa Malaysia Derivates Exchange fell 8.8% in the week to 11th June, to USD 1,030/MT. The price fell in line with weakness in the wider vegetable oils complex and an expected production recovery in Malaysia and Indonesia for the 2021/22 marketing year (MY).
Declines in the Asian palm oil market mirrored a fall in the CBOT soybean oil price on 11th June, which also fell over concerns that biofuel blending requirements in the US would be lower, following an announcement by the Environmental Protection Agency. Crop-beneficial rains are also expected across the US Midwest before the start of the new US soyabean MY in September. This sluggishness of new demand and liquidation of existing long positions as prices fell, caused an even bigger drop in prices for the Malaysian contract. Weakness in Argentinian soybean oil and the Ukrainian sunflower oil market has also weighed on palm oil prices.
According to market participants, high vegetable oil prices have also limited demand, along with uncertainty of export levies in Indonesia and import taxes in India causing market players to hold off on purchases. India is waiting on a possible reduction of up to 10% on the crude palm oil (CPO) import duty, while Indonesia is anticipating a reduction of $100/MT on the export levy. However, no official news has been announced regarding either tariff.