Malaysian palm oil futures bounced on Friday as firmer overseas markets and fresh talk of a dip in production lifted sentiment. The palm oil market has been choppy in the past week as concerns over the US and euro debt crisis deepened this week.
It has lost 17 percent so far this year thanks to higher supply although a possible slowdown in output in July and August could recover some losses. "Market players said that the weather is bringing bad yields, therefore production in July is down slightly," said a trader in Kuala Lumpur.
Traders also expected output to fall even more next month as plantation workers in major producing countries will take long break for a Muslim fasting observance, limiting supply and boosting prices.
The benchmark October crude palm oil contract on Bursa Malaysia Derivatives ended up 0.3 percent to 3,140 Malaysian ringgit ($1,048.414) per tonne. Overall traded volume fell to 20,235 lots of 25 tonnes each from the usual 25,000 lots.
Palm oil was partly lifted by firmer grains markets in Asia hours, which rose on bargain hunting after two straight sessions losses triggered by forecasts of milder weather in the US Midwest. But weather concerns still persisted. A historic drought in the southern US Plains intensified in the last week and contributed to dry conditions emerging in the heart of the Midwest crop belt, a weekly US climatologists' report said Thursday.
US soyoil for August delivery rose 0.4 percent in Asia trade hours, while the most active May 2012 soyoil contract on China's Dalian Commodity Exchange barely moved.
"The market is dominated by funds. Some traders booked positions on hot US weather while the refiners took profit to secure their margin," said an oil analyst with Dadi Futures based in China's southern city of Hangzhou.
"Talks of large soybean stocks have capped soyoil prices, traders are waiting for new leads."
Argentina's government on Thursday said China plans to buy more soyoil and soybeans from Argentina in the future after Agriculture Minister Julian Dominguez met with officials in Beijing.
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