Malaysian palm oil futures fell for the second consecutive trading day on Monday (September 28), with the market fluctuating between weak demand and cost support. The benchmark December contract, FCPOc3, closed at 4,663 ringgit per tonne on the Bursa Malaysia Derivatives Exchange, down 9 ringgit, or 0.19%, equivalent to approximately $1,142 per tonne. The trading range narrowed significantly throughout the day, fluctuating only between 4,642 and 4,720 ringgit. In the previous week, the contract had already fallen by 4.61% , and the downward momentum is expected to continue in the short term.

Negative factors dominate: Weakness in overseas edible oil markets coupled with cooling exports

The direct cause of the downward pressure on the market stemmed from the overall weakness of competing edible oils. The most active soybean oil contract (DBYcv1) on the Dalian Commodity Exchange fell 0.84% intraday, while the palm oil contract (DCPcv1) fell even more sharply, by 1.6%; the Chicago Board of Trade soybean oil contract (BOc2) also declined slightly by 0.24%. Palm oil competes with soybean oil and other edible oils for market share in the global vegetable oil market, and the weakness in overseas edible oil markets has created a hard ceiling limiting any rebound in palm oil prices. The drag from fundamentals is also clear. Data from freight inspection agencies Intertek Testing Services and AmSpec Agri Malaysia showed that Malaysian palm oil exports from September 1-25 fell 15.1% to 24.3% month-on-month. In Indonesia, the Palm Oil Association (GAPKI) announced that July exports were 3.19 million tons, a decrease of 9.87% compared to the same period last year. The weakening export data from major producing countries across the board provides context for the downward trend from the demand side.

A buffer remains: Crude oil rebound and ringgit weakness provide support.

The market is not entirely without support. International crude oil rebounded more than 3% on Monday, mainly due to the US rejection of a reconciliation plan with Iran, further dampening expectations for the reopening of the Strait of Hormuz. Stronger crude oil prices increased the attractiveness of palm oil as a biodiesel feedstock . Meanwhile, the ringgit (MYR) weakened by 0.25% against the US dollar, making ringgit-denominated commodities cheaper for foreign currency holders, which also provided some support. A Kuala Lumpur trader stated that stronger crude oil and a weaker ringgit provided support, but "weakness in Dalian and Chicago oils limited the gains." The real focus going forward is on three points: First, whether Malaysia's final September export figures can narrow the decline—if shipments accelerate in the second half of the month, it could alleviate the current downward pressure; second, whether competing edible oils, especially Dalian soybean oil, can stabilize, which will determine when external pressure eases; and third, whether crude oil can maintain its strength, providing sustained support for palm oil in the biodiesel sector. In summary, palm oil is currently caught in a tug-of-war between weak exports and cost support , with its direction largely depending on whether demand-side data shows marginal improvement.

Frequently Asked Questions

Q: Why has palm oil fallen for two consecutive trading days? A: The direct pressure comes from the weakness of competing edible oils in the international market—Dalian soybean oil and palm oil, as well as Chicago soybean oil, all fell, forcing palm oil to follow suit. More fundamentally, demand is weakening. Malaysian exports in September fell by 15.1%-24.3% month-on-month, and Indonesian exports in July fell by nearly 10% year-on-year. Data from major producing countries suppressed the rebound potential of the market. Q: Crude oil has clearly rebounded, so why hasn't it driven palm oil up? A: The strength of crude oil has indeed increased the attractiveness of palm oil as a biodiesel feedstock and provided a buffer for the market. However, the current pricing focus in the edible oil market is on the edible demand side. The weakness in exports outweighed the positive impact of its energy attributes, resulting in a slight advantage for the bears. Q: Why is the 15%-24% decline in exports such a wide range? A: This range comes from the different statistical methods of two independent inspection agencies, ITS and AmSpec. The two agencies have different sampling ranges and shipping schedules, which historically result in slightly different estimates. The market usually uses the median of the range as a reference. Q: What signals should we focus on in the market going forward? A: Keep an eye on three points: whether Malaysia's final September export figures improve, whether Dalian soybean oil can stop falling, and whether crude oil prices can maintain their strength. These three variables correspond to demand, competitive edible oil price pressure, and biodiesel price support, respectively. Any marginal change in any of these areas could alter the current tug-of-war.