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Palm production likely to fall in June due to better demand

The price of palm oil in Malaysia rose on Wednesday as a result of improved demand, a rally of soyoil and a possible reduction of production for June.

By midday, the benchmark palm oil contract on Bursa Malaysia's Derivatives exchange for September delivery had gained 66 Ringgit or 1.66% to 4,034 Ringgit per metric ton.

"Overall, the market has improved. Demand has returned to normalcy." Our preliminary assessment of lower production in the month of June, coupled with the rallying soyoil prices, helped keep palm prices competitive, said Paramalingam Supramaniam at Selangor brokerage Pelindung Bestari.

Dalian's palm oil contract, which is the most active contract, gained 0.79%. The Chicago Board of Trade's (CBOT) soyoil price was 0.71% higher.

As palm oil competes to gain a share in the global vegetable oils industry, it tracks the price fluctuations of competing edible oils.

According to AmSpec Agri Malaysia (an independent inspection company), exports of Malaysian products containing palm oil rose by 4.3% in June compared to the previous month. Intertek Testing Services reported a 4.7% increase.

The statistics bureau reported that Indonesian crude palm oil and refined palm oils exports increased by 53% from a year earlier in May. This was because the tropical oil began trading at a lower price than its competitors, which boosted demand from major buyers.

Indonesia increased its crude palm oil benchmark price to $877.89 a metric ton, up from $856.38 a metric ton, in June. A trade ministry regulation published on Monday showed this increase.

The palm ringgit's trade currency, the dollar, fell by 0.41%, making the commodity more affordable for buyers who hold foreign currencies.

Technical analyst Wang Tao stated that palm oil could retest the resistance level of 4,015 Ringgit per metric tonne. A break above this would lead to gains in the range between 4,041 Ringgit and 4,063 Ringgit.

(source: Reuters)