Malaysian palm futures closed nearly 3 percent lower on Wednesday after recouping some early losses on short-covering, traders said. The early sell-off was sparked by crude oil's extended losses after settling below $60 for the first time in 20 months on Tuesday on demand worries, traders said. The benchmark January contract on the Bursa Malaysia Derivatives Exchange fell 47 ringgit, or 2.96 percent, to 1,539 ringgit ($429) per tonne.
The contract hit a low of 1,505 ringgit per tonne earlier. Other traded contracts dropped between 44 ringgit and 80 ringgit. The overall volume stood at 8,207 lots of 25 tonnes each.
US crude futures settled on Tuesday below $60 a barrel for the first time since March 2007 as demand concerns deepened amid slumping equities and as the dollar strengthened. In Asian trading, crude oil was down $0.98 to $58.35 per barrel by 1024 GMT, off a low of $57.70.
The most active December soybean oil contract was down 0.30 cents, or 0.89 percent, at 33.43 cents per pound. Traders said they feared that palm oil prices have yet to fully price in current weakness in crude oil prices.
"When palm hit its recent low of 1,331 ringgit per tonne (on October 28), crude price was still above $60 a barrel. Now crude is below $60, so I think palm will go down further," said a trader at a Kuala Lumpur-based brokerage firm. The same trader said falling crude oil has also raised concerns that palm-based biodiesel is becoming less attractive now as it offers smaller margins.
"As demand may only come from food consumption, palm oil is not going to move out of the country. So by the end of the month, stocks will remain very high," another trader at Malaysian brokerage said.Malaysian crude palm oil stocks rose 6.9 percent in October to a record 2,086,452 tonnes from a revised 1,951,417 tonnes in September, official crop agency Malaysian Palm Oil Board said on Monday.
INDONESIA PALM DOWN: In Indonesia, the world's largest crude palm oil producer, prices of the commodity fell on Wednesday, tracking Malaysian palm futures. The state marketing centre in Jakarta, which sells palm oil from state plantations, said it sold at a top price of 5,078 rupiah per kg ($0.44), down from 5,123 rupiah on Tuesday.
Producers in Medan - home to Belawan port, Indonesia's key port for palm oil exports - did not sell crude palm oil on Wednesday. On Tuesday it sold crude palm oil at 4,990-5,140 rupiah a kg. Meanwhile, refiners in Jakarta sold refined, bleached, deodorised (RBD) palm olein, which is used in cooking oil at around 5,800 rupiah, little changed from 5,750 rupiah a kg on Tuesday, supported by a falling rupiah.
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