Palm oil plunges

Malaysian palm oil futures slid to their lowest in more than 11 months on Wednesday, dragged by fears of abundant global oilseed supplies, and as estimates for an uptick in palm oil output this month turned investors wary. The benchmark October contract on the Bursa Malaysia Derivatives Exchange fell to 2,247 ringgit in late trade, a level last seen on August 12, 2013, before settling at 2,254 ringgit ($712) per tonne by the day's close, a 1.1 percent drop.
Total traded volume stood at 48,914 lots of 25 tonnes, above the daily average of 35,000 lots. The Malaysian Palm Oil Association, a group of growers, forecast palm oil output in the world's No 2 producer to rise 16.3 percent between July 1-20 compared to a month ago, raising investor concerns and pressuring palm prices that have chalked up losses of nearly 7 percent in July.
Some market participants, however, said the higher output could be due to early harvesting of palm fruit before plantation workers go on holiday for the Eid al-Fitr celebrations. "Prices came down because of talks that the first twenty days' production is higher," said a trader with a local commodities brokerage in Kuala Lumpur. "But not everyone is really convinced to sell, because there's usually some early harvesting."
Malaysia churned out 1.57 million tonnes of crude palm oil in June. Strength in the Malaysian ringgit, which advanced 0.24 percent to 3.1685 per dollar in late trade also dampened buying interest for the ringgit-priced palm feedstock. Technicals show Malaysian palm oil is expected to test a support at 2,250 ringgit per tonne, with a good chance of breaking below this level and falling more towards 2,220 ringgit, said Reuters market analyst Wang Tao.
Improving conditions for a bumper US soyabean harvest and prospects of rising global oilseed stocks also weighed on palm. Higher supplies of the competing oilseed for crushing could weaken soyaoil prices, and in turn water down food and fuel demand for palm. In competing vegetable oil markets, the US soyaoil contract edged down 0.1 percent in late Asian trade, while the most active soyabean oil contract on the Dalian Commodities Exchange fell 0.5 percent.