Price surge damps demand for palm oil

High prices for crude palm oil are reducing global demand, including its use as a biodiesel, as Malaysia on Tuesday reported that exports of the commodity fell 18 per cent in June.

The fall in exports by the world’s biggest producer of palm oil followed a record price for CPO future contracts in early June, which prompted buyers to turn to cheaper vegetable oils, such as soyabean oil.

Palm oil is more than 8 per cent off its record high of M$2,764 a tonne in June, but the benchmark future contract rose 0.8 per cent on Tuesday to M$2,530 (US$736) a tonne due to higher prices for soyabean oil and a fall in palm oil production.

Soyabean prices have risen recently as US farmers have cut acreages devoted to soyabean and planted more corn. Soyabean rose last week to US$8.50 a bushel, up 35 per cent since January.

High palm oil prices have threatened to curb Malaysia’s ambitions to become a main producer of biodiesel and some Malaysian companies have already postponed plans to build biodiesel plants amid fears they could be unprofitable.

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