Malaysian crude palm oil dropped 1.2 percent on Thursday as traders booked profits on slowing export demand, with orders shifting to top producer and competitor Indonesia. Palm oil bucked the trend in commodity markets - from oil to soybeans - that rose after the US Federal Reserve said it would keep interest rates near zero until at least late 2014, providing ample liquidity to spur growth.
Palm oil investors instead focused on cargo surveyors reports of a decline of close to 17 percent to 19.9 percent in Malaysian exports from January 1 to 25, with some saying orders had shifted to Indonesia, which offers cheaper cargoes thanks to lower export taxes. "Things are not really looking up for Malaysian palm oil in January," said a Malaysian trader with a foreign commodities brokerage. Benchmark April palm oil futures on the Bursa Malaysia Derivatives Exchange dropped 1.2 percent to settle at 3,131 ringgit ($1,030) per tonne.
Traded volumes were thin after the long weekend holiday at 17,860 lots of 25 tonnes each, versus the usual 25,000 lots. Technicals did not look promising. Reuters technical analyst Wang Tao said palm oil was expected to drop to 3,103 ringgit per tonne, with a downside potential at 3,049 ringgit.
Malaysia has to contend with declining margins as refined palm oil product prices are falling after Indonesia's massive export tax cut on processed edible oils triggered a ramp up in cargoes. Cargo surveyor Societe Generale said Malaysian palm oil exports for January 1-25 dropped 19.9 percent to 947,401 tonnes from 1,182,707 tonnes shipped during December 1-25 as countries like China and India cut back on orders. The US soyoil contract for March delivery rose 0.4 percent in Asian trade after posting gains in the previous session. China's commodity markets are closed for Lunar New Year this week.
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