China's soyaoil futures hovered below two-year highs hit earlier on Tuesday as news of the government lifting a ban on Argentina soyaoil partly offset the bullish soybean supply scenario. China's most active May 2011 soyaoil contract on Dalian Commodity Exchange climbed 0.7 to hit 8,986 yuan - a level unseen since September 1, 2008.
"The market's cooling down compared to yesterday on concerns over the possibility that the government will release state reserves to cap vegetable oils prices," said Zhang Juan Cong, a vegetable oil analyst in China's Southern city of Hangzhou.
China lifting its ban on Argentine soyaoil and market talk of the government releasing state vegetable oil reserves this month may temporarily stall a rally that started last Friday when the US trimmed its soy crop estimate. Malaysia's benchmark palm futures ended 0.9 percent lower at 2,900 ringgit ($935.5) per tonne in the morning session. Traded volume was heavy, rising to 17,513 lots of 25 tonnes each from the usual 10,000 lots. A Reuters analysis showed palm oil may retrace to 2,847 ringgit a tonne, as a gap that formed on Monday is likely to be partially filled.
"Prices succumbed to mild profit taking and some technical sell-off after the recent hike in prices," said a trader in Kuala Lumpur. "Millers and producers are waiting on the sidelines as the arrival of fresh fruit bunches has been dismal in the first 10 days of October." Palm oil may move higher if Malaysian production in October starts to fall and exports maintain the current momentum, traders said. Traders are waiting for cargo surveyors to issue Malaysian export data for the first half of this month on Friday, after data showed a slight decline in exports for October 1-10.
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