KUALA LUMPUR, July 25: Malaysian palm oil futures dropped to their lowest in more than four years on Thursday, as the market expected global edible oil supplies to rise with a boost in soybean yields.
Ideal weather in the U.S. Midwest could pave the way for a record soybean harvest. That could possibly boost supplies of soyoil and shift some food and fuel demand away from palm oil.
Malaysian palm oil exports for July 1-25 fell 7 percent from the same period last month, also weighing on the market, although traders said this was a recovery from a 15.9 percent drop in the first ten days of the month.
‘Palm oil is just dancing to soybean’s tune, even though exports are showing signs of recovery,’ said a trader with a foreign commodities brokerage.
By midday, the benchmark October contract on the Bursa Malaysia Derivatives Exchange was unchanged at 2,222 Malaysian ringgit ($700). Earlier in the session it had dropped to 2,202 ringgit, the lowest since Nov. 3, 2009.
Total traded volume stood at 19,289 lots of 25 tonnes each, higher than the average 17,500 lots.
Other traders said palm oil could go well below 2,202 ringgit, as Malaysian palm oil production is expected to rise seasonally in the second half of 2013.
‘Production will start going up and we will see a build up in stocks,’ said another trader. ‘The next major upswing in export demand will come from Asian festival season in China and India around the last quarter of 2013.’
In other markets, Brent crude slipped below $107 after weak China economic data further toned down the fuel demand outlook in the world’s second largest oil consumer.
Traders said the decline in palm oil prices has spurred demand for palm-based biofuel, with consumers booking palm biodiesel cargoes until early next year as crude remains above $100 a barrel.
In vegetable oil markets, the U.S. Soyoil contract for December inched up 0.1 percent in Asian trade. The most-active January soybean oil contract on the Dalian Commodities Exchange fell 1.3 percent.
(agencies)
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