Palm oil futures extend rally for third day as drought sparks supply concerns

⑴ Palm oil prices extended their rally after closing on Tuesday at their highest level since December 2024, as continued drought in key producing regions fueled concerns about supply prospects. On Wednesday, Kuala Lumpur palm oil futures rose as much as 0.9% to 4,905 ringgit per ton, marking the third consecutive trading day of gains. ⑵ Traders stated that market expectations of adverse weather suppressing production in Indonesia and Malaysia, the two major producing countries, are driving prices higher. According to the USDA weekly report, the developing El Niño phenomenon is causing significantly drier weather in both countries, with many areas experiencing little to no rainfall, which may start to put pressure on oil palm trees as well as crops such as rice, corn, and soybeans.