Palm oil slips, posts worst annual loss since 2008

Malaysian palm oil futures fell on Monday, weighed by lower exports although losses were limited by expectations that heavy rains in the world's No 2 producer may disrupt production and bring down record high stocks. Palm oil notched its worst annual performance since the financial crisis in 2008, losing more than one-fifth thanks to high stocks and a sluggish global growth that has dented edible oil demand.
For the coming year, traders are watching the impact of Malaysia's zero export tax for crude palm oil in January and a stricter import rule for edible oil to be enforced by China, the world's second-largest edible oil buyer. "Malaysia's new export duty will be tested. There are more concerns on the tax structure because it is now an even playground for both countries (Malaysia and Indonesia)," said a dealer with a foreign commodities brokerage in Malaysia.
"I foresee an even fiercer price competition." Malaysian cargoes are still likely to be cheaper as it set the January export tax rate at zero compared to Indonesia's 7.5 percent. On the last trading day of the year, the benchmark March contract on the Bursa Malaysia Derivatives Exchange lost 2.6 percent to close at 2,433 ringgit ($796) per tonne. Prices hit an intraday high of 2,517 ringgit per tonne - a level last seen on November 2, prompting some traders to book profits soon after.
Total traded volumes stood at 43,399 lots of 25 tonnes each, much higher than the usual 25,000 lots as traders squared their positions. Malaysian palm exports during December fell 5.7 percent to 1,568,510 tonnes from 1,663,092 tonnes a month ago, said cargo surveyor Intertek Testing Services on Monday. Another cargo surveyor, Societe Generale de Surveillance, reported a steeper drop at 7.9 percent for the same period. Concerns of heavy rains in Malaysia disrupting supply persisted after the weather office upgraded its warning on Monday from yellow to orange stage for key producing states such as Pahang and Johor. In competing vegetable oil markets, US soyaoil for March delivery fell 0.6 percent in late Asian trade. The most active May soybean oil contract on the Dalian Commodity Exchange closed 0.4 percent lower.