Rains and floods can disrupt logistics and harvesting, lowering high stocks and lifting prices that are on track for a yearly loss of above 23 percent - steepest decline since the 2008 financial crisis. "The floods will ensure that there's no major sell off in the market," said a trader with a local commodities brokerage in Kuala Lumpur.
"Everybody wants to square their books, that's why you don't see much range nowadays. I can safely say that 2,200 ringgit is already the bottom for the market." The benchmark March contract on the Bursa Malaysia Derivatives Exchange inched up 0.1 percent to close at 2,430 ringgit ($796) per tonne, slightly lower than its intraday high at 2,440 ringgit, a level unseen since Nov 27.
Total traded volumes stood at 16,062 lots of 25 tonnes each, much lower than the usual 25,000 lots as trading activity slowed towards the end of the year. Despite the heavy rains, palm oil is still trading at a wide discount to competing soyoil that could draw in demand from big Asian consumers like India and China next year. This comes as the soy exporting Americas face adverse weather that can crimp the supply of oilseed available for crushing into edible oils.
"The wild card is supply in the U.S and South America - if there is tight supply then the market will be looking forward to our production," the trader said. "If there is any production deficit in January, February and March, the only oilseed that can provide that kind of quantity will be palm." Malaysian palm oil exports in the first 25 days of December inched up 0.5 percent from a month ago, on higher demand from India and stronger crude palm oil exports, according to data from cargo surveyor Intertek Testing Services.