The palm oil price on the Malaysian commodity exchange fell to its lowest in six weeks amid expectations of a seasonal uptick in production, losses in related vegetable oils and a decline in oil markets.

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Crude palm oil futures on the Bursa Malaysia Derivatives (BMD) exchange, which influence international vegetable oil prices, fell to MR3,996/mt ($833.80/mt) by the end of morning trade April 17, down 2% following overnight losses in soybean oil on the Chicago Board of Trade and falling prices in China.

In China, the second largest buyer of vegetable oils after India, the benchmark Dalian Commodity Exchange (DCE) soybean oil contract fell 1.2% and the palm olein contract also eased 1.2%, to Yuan 7,474/mt ($1,033.16/mt) April 17.

A likely bumper harvest of soybean oil in South America coupled with China's weak demand for soybean could be a drag on palm oil prices as the two vegetable oils trade in tandem, David Ng, a trader at Kuala Lumpur-based trading company Iceberg X, said April 17.

Export data from Malaysia and Indonesia this week showed a spurt in demand in March along with reduced palm oil inventories. However, traders shrugged off these bullish signals as big buyers in India and China were turning to sunflower oil and soybean oil, multiple analysts told S&P Global Commodity Insights.

Any fresh dips could invite rapid short covering and bargain hunters as the market has fallen for six consecutive trading days, vegetable oil trader Savera Commodities Ltd. said in a note April 17.

Rising vegoil output

Despite data showing that Malaysia's palm oil inventories fell to a 10-month low on April 15, vegetable oil production updates globally soured trade sentiment this week.

Global oilseeds lobby Abiove revised its estimate for Brazilian soybean production upward for 2023 in data released April 16.

With the upward revision pegging Brazil's 2023 soybean output at a record high of 160.3 million mt, its beginning stocks this year have been estimated at 5.9 million mt, 1.2 million mt more than what was calculated previously. The new data comes as ample supply of soybeans has kept a lid on prices in the world's largest soybean producer.

In the latest World Agricultural Supply and Demand Estimates report on April 11, the US Department of Agriculture reduced its import, export and residual forecasts for US soybeans, resulting in a 25-million-bushel increase to its 2023-24 carryout forecast to 340 million bushels, above expectations that it would be at 317 million bushels.

The report has prompted funds to unwind positions and build short interests across the grain and oilseed sectors. This has impacted strategies on the DCE and BMD, triggering a decline to more realistic levels, Marcello Cultrera, director at Singapore-based commodity consultancy Apricus 8 Pte. Ltd., told S&P Global.

Meanwhile, an El Nino weather event has ended, Australian authorities said April 16, adding that they were uncertain if a La Nina phenomenon, predicted by some forecasters, would form later this year.

An El Nino phase indicates lower rainfall and dryness in South Asia and weighs on palm oil production in Malaysia and Indonesia, which account for 85% of the world's palm oil production.

Palm loses price advantage

Despite bullish palm oil fundamentals and a weaker Malaysian ringgit, palm is getting slightly expensive than other edible oils, and considering that ample sunflower and soybean supply has been bearish for their prices, it seems other edible oils' prices are setting the tone for palm prices, Budiman Suwardi, the Singapore-based head of treasury and markets at Borneo Agri-Resources International, a palm oil refiner and exporter, said April 17.

Platts, part of S&P Global, assessed CPO FOB Indonesia at $975/mt April 16, down 1.5% from the week before, while Soybean oil Brazil FOB Paranagua fell 3% to $911/mt in the same period.

However, sunflower oil FOB Black Sea remained relatively stable at $829/mt, down a dollar from the week before.

The average price of crude palm oil imports by India in March was about $70/mt more than that of crude sunflower oil, pushing buyers to prefer sunflower oil over palm oil, trade body Solvents Extractors' Association of India had said April 11.