Palm oil tumbles

Malaysian crude palm oil touched a new six-week low on Thursday as the ringgit currency strengthened against the US dollar, making it expensive for refiners to buy feedstock to process at a time when demand has slowed. Losses were capped earlier before the midday break by upbeat global manufacturing data from the United States, China and Germany that helped to ease worries on slowing growth. Palm oil markets, however, are still down almost 4 percent this year.
The ringgit is the second best performing currency in Asia, logging a rise of close to 5 percent in 2012. Any further appreciation in the ringgit could squeeze margins for Malaysian refiners who are losing market share to Indonesia. "Market volume is on the low side as we are heading towards another long weekend, so these two days the market will not be too active," said a trader with a foreign commodities brokerage in Kuala Lumpur.
Benchmark April palm oil futures on the Bursa Malaysia Derivatives Exchange lost 0.7 percent to 3,063 ringgit ($1,007) per tonne. Prices touched a new low of 3,036 ringgit, a level last seen on December 21.
Traded volumes stood at 22,712 lots of 25 tonnes each, thinner than the usual 25,000 lots, ahead of the long weekend holiday. On the demand side, Malaysian palm oil exports for January eased close to 12 percent, according to cargo surveyor Intertek Testing Services. Another cargo surveyor, Societe Generale de Surveillance, said Malaysian exports for the same period fell 13 percent to slightly below 1.3 million tonnes. The decline was in line with market's expectation as top buyers such as China, India and European Union cut back orders.
Some traders also attributed the fall to the shift in orders to Indonesia, which slashed export taxes for processed oils. Adding to the drop was a delay by No 2 producer Malaysia in issuing tax free crude palm oil export taxes, which has made it difficult for licence holders to supply overseas refiners with cheap feedstock and meet existing export contracts for crude palm oil.
In related news, top producer Indonesia plans to create one of the world's largest palm oil and rubber firms in March by combining state planters with total assets of $5.6 billion. The US soyoil contract for March delivery slipped 0.3 percent in Asian trade while the most active September 2012 soyoil contract on China's Dalian Commodity exchange edged up 0.6 percent.