Malaysian palm oil hits two-week low

Malaysian palm oil hit a two week trough before paring losses late on Wednesday, with sentiment driven by comparative vegetable oils and crude prices, as market players braced themselves for further weakness due to a higher production cycle.
The benchmark June crude palm oil contract on Bursa Malaysia Derivatives closed at 3,348 Malaysian ringgit ($1,105) a tonne, after earlier falling 2.1 percent to a low of 3,302 ringgit. Traded volume on the June contract was 13,246 lots of 25 tonnes each, versus Tuesday's near three-week high total at 21,496 lots. "Palm fundamentals are also looking bearish, but today there is little fresh news other than outside things like crude oil," said one trader.
The most-active September 2011 soyoil on the Dalian Commodity Exchange traded at 10,118 yuan versus an open at 10,120 yuan. Palm oil analysts say every change of $10 per barrel in the price of crude oil could result in a change of 200 ringgit per tonne in the price of crude palm oil. Palm oil is less likely to be channeled into biofuels because of a lack of government subsidies, but mandates in Brazil and the United States may see more soyoil taken up, which leaves palm oil to lead the food sector.
On Monday, palm oil touched a peak of 3,454 ringgit, a level not seen since March 21, despite inching closer to a higher output cycle in the second half of the year. "CPO supplies are bearish," said one analyst. "There could be an additional 3.7 million tonnes this year, which we expect in the second half." On Monday, data showed March palm oil stocks in Malaysia rose to a three-month high on production surging nearly 30 percent. Global palm oil production was about 45 million tonnes in 2010.
"Prices will remain steady with a declining trend and in the second half I expect some drop," the analyst said. "I'm worried about next year's price, which should be below 3,000." ICDX's June CPO futures contract was at 9,590 rupiah per kg, compared to 9,610 rupiah per kg when it opened. Market volume was 1,075 lots of 10 tonnes each. Cargo surveyors Intertek Testing Services and Societe Generale de Surveillance are due to issue Malaysia's April 1-15 exports on Friday.