Malaysia's crude palm oil futures hit one-week lows on Friday as traders squared profits amid losses in the overseas soya complex, although worries over a supply shortage continued to weigh. Palm oil rallied to 33-month highs earlier in the week as heavier-than-usual rains stalled harvesting in top producers Indonesia and Malaysia, while dry weather slowed soya planting in South America, raising concern over tight supplies.
The benchmark March 2011 crude palm oil contract on Bursa Malaysia Derivatives fell as much as 2.7 percent to settle at 3,761 ringgit ($1,224.483) a tonne - a level unseen since December 30, 2010. Overall traded volume doubled to 30,156 lots of 25 tonnes each. "The market is likely to be stable until early March due to an Indian festival later in this month and Chinese New Year in early February," said a trader in Kuala Lumpur.
He added, "It's a short term fall as production in January could be hit further by rainfall in plantations in east coast and Sabah in Borneo island." Traders are also on the watchout for official data from industry regulator, Malaysia Palm Oil Board, on Monday. A Reuters poll showed Malaysian palm oil stocks fell to a five-month low as overseas demand outpaced sluggish output. Demand from China ahead of Lunar New Year in February and fears of rising food prices due to supply tightness will keep palm oil prices at the high side, traders said ahead of the data. The United Nation's food agency on Wednesday reported food prices hit a record high last month, outstripping levels that triggered riots in 2008.
A Reuters technical analysis showed Malaysian palm oil might retrace to 3,739 ringgit per tonne. Crude oil prices fell to below $89 a barrel as the dollar strengthened ahead of US December employment data due later in the day. US soyaoil for January delivery fell 0.8 percent in Asian trade hours, while the most active September 2011 soyaoil contract on China's Dalian Exchange fell 0.7 percent.
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