Malaysian palm oil falls

Malaysian palm oil futures shed as much as 3 percent on Wednesday, tracking other commodity prices lower as the nuclear crisis in Japan sent investors scrambling for perceived safe haven assets. The benchmark May 2011 crude palm oil contract on Bursa Malaysia Derivatives ended down at 3,347 Malaysian ringgit ($1,091) a tonne, after earlier touching a low of 3,268 ringgit.
Prices of the vegetable oil, used in products such as food, cosmetics, tyres and biofuels, hit a near four-month low of 3,250 on Tuesday. "It's a sad scenario," said one trader. "There have been two attempts to recover since Friday, but the market has succumbed to selling pressure. Overnight, Chicago collapsed. It is time to form a bottom - 3,250 should be a temporary bottom."
Japan's nuclear crisis appeared to be spinning out of control on Wednesday after workers withdrew briefly from a stricken power plant because of surging radiation levels, but desperate efforts to avert a catastrophic meltdown quickly resumed. "There has been a lot of unwinding of long positions in soft commodities because of the earthquake in Japan," said a palm oil analyst. "Risk aversion, and the need to raise cash."
"(Palm oil) supplies should pick up in April and increase in the second half," he added. "But this recent Japan quake has in the short-term, made people scramble back to safer assets." Traded volume on the Malaysian benchmark stood at a near three-week high at 25,206 lots of 25 tonnes each, compared 18,601 lots notched on Tuesday. ICDX's May CPO futures contract was at 9,825 rupiah per kg, compared to 9,690 rupiah per kg when it opened. Market volume was 789 lots of 10 tonnes each.
Japan imports around 500,000 tonnes of palm oil each year. Global palm oil production was about 45 million tonnes in 2010. In comparable vegetable oil markets, the most-active September 2011 soyoil on the Dalian Commodity Exchange traded at 9,806 yuan versus 9,700 yuan.
Palm oil is seen heading for record highs in 2011 on expectations that costly crude oil would bolster biodiesel demand and offset better harvests, participants at a conference in Malaysia said this month. "CPO's biodiesel potential has barely been touched as yet," said Gary Mead, editor of Worldcrops.com. "Crude oil prices are destined to be much higher this year, despite Japan. "Japan is going to need to import a lot of diesel this year as a consequence of the disaster there," he added. "European refiners are struggling to cope with European demand for diesel and diesel prices will go higher, hence pulling up demand for biodiesel."