Malaysian palm oil falls

Malaysian palm oil futures fell 1.3 percent on Wednesday, as the imminent onset of a higher production cycle offset an anticipated short-term demand uptick. The benchmark September crude palm oil contract on the Bursa Malaysia Derivatives Exchange ended at 3,178 Malaysian ringgit ($1,049) a tonne, its low for the day.
Market players are expecting production to rise in the second half of 2011 in Southeast Asian producing countries, which account for more than 90 percent of global output. Last week, benchmark prices touched their lowest level since May 6, at 3,163 ringgit, as stock levels grow.
Stocks in Malaysia are expected to rise above a 16-month high of 1.92 million tonnes hit last month. While this could draw in more demand, production levels are key. "Demand is OK because we are moving toward the Muslim festival season - the problem is production is still going higher," said a trader. Investors say prices are likely to receive a short-term boost from improved demand in importing countries as the Muslim festival of Ramadan approaches in August.
On Monday, data showed that exports of Malaysian palm oil products for June 1-20 rose 22 percent to 969,804 tonnes from 794,322 tonnes shipped during May 1-20. Traded volume for the September contract was 15,700 lots of 25 tonnes each. Palm oil prices in the coming year might fall about 9 percent from their average in the last 12 months as global palm output is expected to rise sharply, Hamburg-based oilseeds analysts Oil World said late on Tuesday. Also weighing on prices was Tuesday's move by top palm oil producer Indonesia, which said it would lift its palm oil export tax in July to 20 percent.
"The Indonesian government is raising the export tax for July," said a dealer. "It will make Indonesian producers export more palm oil in the month of June." In the near term, benchmark prices may either hover around 3,163 ringgit per tonne or rebound moderately to 3,278 ringgit, Reuters technical analyst Wang Tao said.
In related markets, Brent crude rose after five sessions of losses, after Greece's embattled government survived a confidence vote to avoid a debt default which helped ease concerns on the vulnerability of risky assets. US soyoil for July delivery eased in Asian trade, while the most active January 2012 soybean oil contract on the Dalian Commodity Exchange also slipped. "Cash buying is quite strong - especially the trading houses buying Indonesian CPO for nearby positions," a second palm oil trader said. "Without any real change to fundamentals, it is going along with outside markets like soy."