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Malaysian crude palm oil futures slid another 4 percent on Wednesday as demand remained weak despite lower prices, pushing down vegetable oils across Asia. The benchmark June contracts on the Bursa Malaysia Derivatives Exchange fell as much as 154 ringgit, or 4.5 percent, to 3,296 ringgit ($1,041) a tonne.
The contract finished the session down 98 ringgit at 3,352 ringgit a tonne. "Demand is still very slow, there is not much action," said one trader with a foreign brokerage. "We are waiting for China's entry into the market to boost sentiment. But as of now both India and China seem to be covered."
Chicago Board of Trade soyaoil futures fell more than 1 percent in Asian trade and most contracts on China's Dalian soyaoil were down. The price of palm oil, used as cooking oil and in products ranging from biscuits to biofuels, has fallen more than 25 percent since it hit historic high of 4,486 ringgit a tonne this month. The palm oil market has been hit by lack of buying by China and India, the world's top edible oil buyers, and by rising palm oil production in Malaysia.
Exports of Malaysian palm oil products in March 1-15 rose 10 percent, Intertek Testing Services said on Saturday, significantly less than a jump of 54 percent reported for March 1-10 by the cargo surveyor. Malaysian palm oil stocks rose to a record 1.93 million tonne at the end of February due to higher production and a decline in exports.
In Malaysia's physical market, crude palm oil for March shipment in the southern region was quoted at 3,340/3,400 ringgit a tonne. There were no trades reported as buyers stayed away from the market. A sharp downturn in Chicago futures has prompted worries over possible cancellations by Chinese buyers of cargoes of soyaoil and palm oil.
Major buyers have already cancelled at least three Argentine soyaoil cargoes this month, before Beijing released soyaoil from state reserves in an effort to tame inflation running at nearly 12-year highs. Traders in Malaysia said the risk of defaults by buyers was high but they had not heard yet of any deals being cancelled.
"They (the Chinese buyers) haven't started defaulting yet. They may default if the market goes too low," said an official with a plantation house in eastern Sabah State, which exports its palm oil mostly to China. "There is talk of a possible washout if local palm oil prices go too low."

Copyright Reuters, 2008

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