Malaysian crude palm oil prices fell to near eight-week lows on Wednesday on expectations that stocks of the edible oil recovered in July. Stocks likely climbed in July to their highest since February as exports slow and production rises, snapping four straight months of declines, a Reuters survey showed on Wednesday.
Industry regulator Malaysian Palm Oil Board (MPOB) will release official stock and output data on Friday. "Traders are nervous and funds have built massive long position in grains," said a dealer with a local commodities brokerage in Malaysia. "Fundamentals are not looking good with higher output and tepid demand." Benchmark October palm oil futures on the Bursa Malaysia Derivatives Exchange fell 1.5 percent to close at 2,864 ringgit ($922) per tonne. Prices earlier touched a low of 2,854 ringgit, a level last seen on June 15.
Total traded volume picked up after the midday break to 28,933 lots of 25 tonnes each, higher than the usual 25,000 lots. For the week, investors are awaiting other key figures, including a monthly supply and demand report from the US Department of Agriculture (USDA) that could provide some clues on soybean production trends and the extent of drought damage.
On the weather front, palm oil investors are watching out for a possibility of El Nino returning to Southeast Asia, as the hot and dry weather pattern could damage palm oil yields for top producers Indonesia and Malaysia. In other vegetable oil markets, by 1007 GMT, the most active US soyoil contract for December delivery was almost flat. The most active January 2013 soyoil contract on the Dalian Commodity Exchange closed 0.5 percent lower.
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