Palm oil falls

Malaysian palm oil futures fell for a second day to a one-week low on Wednesday, tracking steep losses in soy and crude oil, and further pressured by another round of correction. Weaker soyoil prices could diminish appetite for palm as price-sensitive buyers opt for the rival edible oil instead, market players said. Both are common food and fuel substitutes.
The benchmark January contract on the Bursa Malaysia Derivatives Exchange fell to 2,243 ringgit, the lowest since October 29 in late trade, before settling down 2.4 percent at 2,252 ringgit ($674) per tonne by Wednesday's close. Total traded volume stood at 54,548 lots of 25 tonnes, above the usual 35,000 lots. The discount of free-on-board refined palm olein to Argentina soyoil narrowed to around $70 on Tuesday frrom around $130 at end-August "The time is right for a healthy correction. The gap has been narrowing and we are worried about demand," said a trader with a local commodities brokerage in Kuala Lumpur.
The US soyoil contract for December which is commonly tracked by palm oil tumbled 2 percent in late Asian trade, while the most active January soybean oil contract on the Dalian Commodities Exchange fell 2.5 percent. "Demand from India, China and the Middle East has been tepid, while our prices were skyrocketing. Of course, expectations for reduction in output and end-stocks would help (prices), but to sustain above 2,300 ringgit more demand is needed," the trader added. "Based on the current supply and demand scenario, the market should be somewhere close to 2,250-2,270 ringgit."
Bouts of dry weather earlier this year in Malaysia and Indonesia, the world's top two oil palm growers, are widely executed to curb supply into 2015. "We believe 2015 crude palm oil supply growth will be muted compared to 2014 as planters had a relatively good harvest in 2014," Maybank Investment Bank analyst Ong Chee Ting said in a note on Wednesday, adding that dryness was seen in Malaysia and Sumatra during February-March, and in southern Sumatra and central Kalimantan during September-October. Technicals showed palm oil may find support at 2,259 ringgit per tonne, as it has broken the earlier support at 2,295 ringgit, said Reuters market analyst Wang Tao. Elsewhere, SCB Group on Tuesday brokered the first trade in CME Group's newly listed Malaysian Palm Olein Calendar Swaps.