Palm oil slips

Malaysian palm oil futures dropped on Thursday as investor doubts grew over European leaders coming to an agreement to tackle a debt crisis in a make-or-break summit this week. Prices of the vegetable oil have fallen 18 percent so far this year as the two-year eurozone debt crisis continues to deepen although losses have been limited with crude oil above $100 and heavy rains hitting production.
Palm oil markets have largely priced in a second month of declining stocks in No 2 producer Malaysia for November after a Reuters survey showed production probably fell at a faster pace than exports, traders said. "It's the do-or-die summit that is keeping palm oil markets subdued," said a trader with a foreign commodities brokerage.
"Traders are also on the look out for December 1-10 palm oil exports over the weekend from cargo surveyors that may show declines." Benchmark February palm oil futures on the Bursa Malaysia Derivatives Exchange settled 1 percent lower to trade at 3,089 ringgit ($990) per tonne.
Overall traded volumes stood at 12,861 lots of 25 tonnes each, much lower than the usual 25,000 lots as more investors were unwilling to commit funds or take positions. The Malaysian weather office said moderately heavy rains are starting in the key oil palm growing states of Johor and Pahang from next week and could cause floods in low-lying areas. Both states account for 30-40 percent of national output.
Concerns of heavy rains have kept palm oil prices above 3,100 ringgit level just as prospects for a bumper South American soy crop have weighed on competing soyoil, narrowing the spreads and possibly shifting demand away from palm oil. According to Reuters data, refined, bleached and deodorised palm olein's discount to Argentine soyoil has narrowed to $42 per tonne from $192 per tonne in mid-October. China's most active September 2012 soybean oil contract dropped 0.7 percent.