Asian vegetable oil markets plummeted on Frianicky investors unwound positions amid growing fears of global recession that slows demand and adds to already ballooning stockpiles. Dalian soyoil futures dived by their limit down while Malaysian crude palm oil futures tumbled 8.7 percent. Chicago soyoil was also caught in the sell-off during Asian trading hours.
As Asian stocks dropped, led by the Nikkei's biggest one-day percentage loss since the 1987 stock market crash, commodity players also scrambled out of the markets as concern grew that efforts to unlock battered credit markets were not working.
"The bears have stamped out the bulls in most vegetable oil markets with global financial turmoil and high stocks adding to the carnage," said a head trader with a commodities broker. "The string of palm oil data on Friday exemplifies this."
Cargo surveyors reported up to a 15.7 percent drop in exports to about 338,070 for the first 10 days of October while official crop agency Malaysian Palm Oil Board showed closing stocks in September climbed 5.5 percent to 1.95 million tonnes.
The benchmark December palm contract on Bursa Malaysia's Derivatives Exchange tumbled as much as 165 ringgit to 1,725 ringgit ($491), a level unseen since November 15, 2006. January 2009 Dalian soyoil fell 358 yuan to 6,810 yuan ($996) a tonne.
China,the world's largest vegetable oil buyer, is expected to produce a record 19 million tonnes of soybeans while India, another top consumer, said production of the grain could touch a historic high of 10.8 million tonnes. Bumper harvests in India and China have slowed shipments from Malaysia and Indonesia, the top two growers of palm oil, compounding fears of a record 5 million tonnes of end-stocks by end December.
"Deferments or even defaults are on the cards with price-sensitive China and India," said another trader with a local trading house. "Palm oil markets could tumble further." After steep price falls over the past two months, Indian and China have called or redrawn about a million tonnes of palm oil deals.
A march into biofuels by palm oil has hit the buffers thanks to declining crude oil prices, which makes biodiesel less competitive, and by legislators either dragging their feet or watering down requirements to substitute biofuels for oil. "Crude oil fell sharply which raised concern that biofuel may no longer be competitive," said a dealer in a Jakarta brokerage firm, adding the market expected crude oil could fall to $80 a barrel soon.
CASH TRADES SLOW Palm prices declined slightly in Indonesian palm oil markets, pressured by the slump in Malaysian palm futures. In Jakarta, the state marketing centre said it sold 10,500 tonnes of crude palm oil at 4,805 rupiah ($0.48) per kg, compared to 4,938 rupiah per kg on Thursday. Producers in Medan - home to Belawan port, Indonesia's key port for palm oil exports - did not hold an auction today.
"I am just worried that when we have an auction again, let's say next Tuesday, price could fall. "Let's hope not," a trader in Medan said. Refiners offered refined, bleached, deodorised (RBD) palm olein, which is used in cooking oil, at 5,500 rupiah per kg, down from 5,650 rupiah per kg on Thursday. In the physical market in Malaysia, crude palm oil for October delivery stood at 1,800/1,820 ringgit a tonne in south region. Trades were done between 1,790 and 1,820 ringgit a tonne.
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