Palm oil drops on record soya crop outlook

July 30, 2013

Malaysian palm oil futures edged down on Monday as investors worried about potential bumper soya crops lifting global edible oil supplies, but a weaker local currency curbed losses. Prices plunged to an almost four-year low last week amid projections that ideal weather in the US Midwest could pave the way for a record soyabean harvest, which would boost soyaoil supplies and shift demand away from competing palm.

US soyabean, which is typically tracked by palm, slid to their lowest in more than a year on Monday as buyers cut purchases of old-crop supplies on the prospect of the record harvest and cheaper prices. “The palm market is lacklustre, and overseas markets do not look good, but the supporting factor is the weakening ringgit. So palm has conflicting signals,” said a trader with a foreign commodities brokerage in Malaysia.

“Most commodities globally – soft commodities, the grain complex, precious metals – are down. I don’t see any reason why palm oil would be spared.” By Monday’s close, the benchmark October contract on the Bursa Malaysia Derivatives Exchange had edged down 0.6 percent to 2,171 ringgit ($673) per tonne.

Total traded volume stood at 44,346 lots of 25 tonnes each, higher than the average 35,000 lots. Technicals showed palm oil is expected to retest support at 2,136 ringgit per tonne, with a good chance of breaking this level and falling more towards 2,097 ringgit, Reuters market analyst Wang Tao said. A rise in global oilseed supplies does not bode well for palm as it struggles with slackening demand from top consumers India and China. Exports in July 1-25 fell 6-7 percent compared to a month ago, cargo surveyors said last Thursday.

But while exports for the whole month of July, due on Wednesday, could fall, declines are expected to be less steep than initially estimated. “There should still be a drawdown in exports for the whole month of July, but it won’t be as bad as earlier anticipated,” the trader added. In vegetable oil markets, the US soyaoil contract for December fell 0.9 percent in late Asian trade. The most-active January soyabean oil contract on the Dalian Commodities Exchange lost 0.6 percent.Courtesy Reuters

Published in ZaraiMedia.com

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