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Malaysian crude palm futures dropped to their lowest in two years on Thursday, tracking sliding crude oil prices and amid worries that an accelerating economic slowdown will cut demand, traders said. The benchmark January contract on the Bursa Malaysia Derivatives Exchange closed 97 ringgit, or 5.55 percent lower, at 1,651 ringgit ($468) per tonne by the close.
The contract earlier fell as low as 1,593 ringgit a tonne, the lowest since October 17, 2006. "This is the old same story. Crude is down, soy is down, equities are down. Everything is down on the back of fears of severe recession coming in," a trader at a brokerage in Malaysia said. US crude futures fell more than $3 to 71.52 a barrel on Thursday, as commodity investors rushed for the exit on fears that a global recession would slash energy demand.
Palm oil - used in products from soap to biodiesel - has lost two-thirds of its value from an all-time high of 4,486 ringgit a tonne in early March, pressured by increased supplies of global vegetable oils and faltering crude oil prices. Contracts of other traded months fell between 73 ringgit and 105 ringgit. Overall volume reached 19,093 lots of 25 tonnes each. "The big issue at the momment is crude oil. If it continues to fall, then all other commodities, which are priced in comparison with oil will tumble," an analyst at a Singapore-based brokerage said.
"But the drop in palm oil has been more severe, so I do not see prices continuing to drop because otherwise there is no supply," the analyst said. In response to the price drop, Indonesia proposed to scrap its tax on palm oil exports when prices drop to a monthly average of $650-$750 a tonne, to weather the financial crisis, Agriculture Minister Anton Apriyantono said.
Under current regulations, the government will not impose a tax on crude palm oil exports in the following month if prices in Rotterdam, the European vegetable oils market, averaged below $550 a tonne a month earlier. The extended sell-off in palm was also fuelled by concerns of a build-up in stocks due to falling exports.
INDONESIAN PALM DOWN: In Indonesia, the world's biggest palm oil producer, prices of both crude palm oil and refined, bleached, deodorised (RBD) palm olein dropped on Thursday, tracking Malaysian palm futures.
The state marketing centre, which sells palm oil from state plantations, said it sold palm oil at 4,210 rupiah per kg, down from 4,818 rupiah a tonne on Tuesday. Producers in Medan - home to Belawan port, Indonesia's key port for palm oil exports - sold palm oil at 4,024 rupiah per kg, down from 4,885 rupiah per kg in Tuesday.

Copyright Reuters, 2008

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