Palm oil futures accelerated their revival as strong Indian import data, and a bigger-than-expected downgrade by the US to its soybean harvest forecast, added to the boost from firm Malaysian export data.

Palm oil futures for November soared by 5.8% on Tuesday to settle at 3,898 ringgit per tonne in Kuala Lumpur.

The gain took to 8.5% their headway for this week so far.

The latest leg of buying was fuelled in part by palm oil playing catch-up with rival soyoil, which for December gained 2.6% in Chicago overnight, after the US Department of Agriculture, in its much-watched Wasde report, downgraded the domestic soybean crop by more than had been expected.

Citing crop damage from heat and dryness, the USDA ditched hopes of a record US soybean harvest in 2022-23 – in turn scrapping expectations of all-time-high soyoil output too.

The US soyoil production forecast was cut by 235m pounds to 26.08bn pounds (11.83m tonnes), shrinking it marginally below the 26.31bn-pound estimated for 2021-22.

Price fall

However, palm oil prices gained further support from data from the Solvent Extractors’ Association of India (SEA) showing India’s imports of the vegetable oil last month at 782,624 tonnes – a surge of 63% month on month, and of 42% year on year.

The surge was spurred by falling prices, which have continued to decline in India from highs reached in May when Indonesia imposed its short-lived export ban in a bid to curb domestic cooking oil values.

The price of crude palm oil (CPO) as delivered to Mumbai fell by $60 per tonne last week to $950 per tonne – taking to $985 per tonne the decline since May 2, when the vegetable oil, unusually, traded nearly at par with rival soyoil.

‘Larger import of palm oil’

Prices of soyoil have fallen by a more modest $607 per tonne in Mumbai since May 2, to $1,335 per tonne, so notching up a $385-per-tonne premium to palm oil.

The opening up of the spread is encouraging “the larger import of palm oil in spite of 5.5% duty payable on import of CPO”, the SEA said.

Total palm oil imports, including those of RBD palmolein and crude palm kernel oil, reached 995,967 tonnes in August – comprising 72% of total vegetable oil imports, up from 44% in July, and the highest reading of 2022.

Futures spread

As measured by futures prices, palm oil was on Tuesday trading at an unusually-large discount of some $605 per tonne on Tuesday, comparing the price of the November Kuala Lumpur contract to that of the Chicago December soyoil lot.

However, that gap was sharply below the near-$650 per tonne reached on Monday, after the USDA’s soybean crop downgrade.

The premium entered the month at a little below $540 per tonne. It fell below $80 per tonne in January, comparing best-traded Chicago and Kuala Lumpur contracts.