On Tuesday (October 29), palm oil futures on the Malaysian Derivatives Exchange continued their weak trend, with the benchmark January contract falling 65 ringgit to close at 4,252 ringgit per tonne, a drop of 1.51%. This not only marked the fourth consecutive trading day of decline but also the lowest closing level since August 7. Furthermore, the monthly chart is expected to show a decline, marking the second consecutive monthly drop.



The current downward pressure on the market stems from a confluence of several key factors. Anilkumar Bagani, Head of Research at Sunvin Group in Mumbai, pointed out that the market weakness began at the start of this week, primarily driven by uncertainty surrounding Indonesia's mandatory blending policy for B50 biodiesel and concerns stemming from the Indonesian Palm Oil Association's (GAPKI) optimistic forecast for this year's production growth. GAPKI's latest forecast predicts that Indonesian palm oil production this year could increase to approximately 56 million tons, supported by favorable weather and high prices, an upward revision from its previous estimate. This potential increase in supply has significantly dampened market sentiment.

Meanwhile, the spillover effects from external markets cannot be ignored. Bagani added that the collective decline in palm oil and soybean oil futures on the Dalian Commodity Exchange, as well as overnight Chicago soybean oil futures, exacerbated the fall in Malaysian palm oil futures. Specifically, the most active soybean oil contract on the Dalian Commodity Exchange fell 0.88%, while the most active palm oil contract fell even more sharply, by 1.86%; Chicago soybean oil prices also fell 0.73%. As a major competitor in the global vegetable oil market, the weakening prices of related oilseed products directly reduced the competitiveness of palm oil.

Currency factors also played a negative role. The ringgit strengthened by 0.24% against the US dollar that day, increasing the cost of ringgit-denominated palm oil for buyers holding foreign currency, thereby dampening export demand. Furthermore, the third consecutive day of decline in international crude oil prices also weakened the economic appeal of palm oil as a feedstock for biodiesel.

Despite the aforementioned negative factors, the market is not entirely without support. According to data released by the Indonesian Palm Oil Association on Tuesday, the country's palm oil stocks fell slightly to 2.54 million tons at the end of August, a 1% decrease month-on-month, as lower production offset weak exports. This data somewhat eased expectations of unlimited supply growth.

Regarding the technical outlook, a well-known technical analysis institution believes that palm oil contracts may stabilize near the support level of 4,269 ringgit per ton and rebound. However, considering the current downward trend in both fundamentals and funding, rebuilding market confidence clearly requires clearer positive signals, such as the final implementation of Indonesia's biodiesel policy or a substantial improvement in demand from major consuming countries. In the short term, market participants will continue to seek a new balance between expectations of production growth and demand resilience.