Malaysian palm oil futures dived to their lowest in more than three years on Tuesday, as slowing demand from Asia coincided with a drop in the edible oil's appeal as a substitute for soy oil, with the US soybean harvest progressing at a record pace.
Lacklustre palm oil shipments, despite the Malaysian government increasing a tax free export quota for crude palm oil, is now certain to boost stocks in September above the ten-month high logged in August. "There is nothing to do but sell. Everything is working against palm oil, from fundamentals to other global markets," said a trader with a foreign commodities brokerage in Malaysia.
The benchmark December contract on the Bursa Malaysia Derivatives Exchange dropped 8.7 percent - its steepest daily drop since the 2008 financial crisis - to 2,250 ringgit ($737) per tonne, a level unseen since November 2009. It later closed at 2,255 ringgit per tonne. Total traded volumes jumped to 49,867 lots of 25 tonnes each, nearly double the usual 25,000 lots as dealers aggressively sold off the market.
Reuters market analyst Wang Tao said technicals showed palm oil would rebound to 2,500 ringgit per tonne, as its fall may temporarily stop around a support at 2,407 ringgit, but that rebound would little affect the current downtrend. Palm oil exports in September hovered around 1.4 million tonnes, barely moving from a month ago. Malaysian plantation officials and traders now say stocks could easily hit 2.5 million tonnes, with October shaping up to be a peak production month. In other vegetable oils markets, US soyaoil for December delivery dropped 1.4 percent in Asian trade. The Dalian Commodity Exchange remains closed for a holiday in China and will resume trading on October 8.
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