Palm oil eases

Malaysian palm oil futures fell on Wednesday, but held on to this month's strong gains as monsoon floods curb output in Malaysia, although the market recorded a 15 percent drop this year due to plentiful global edible oil supplies. The flooding could result in palm oil output declining by around 15 percent to 30 percent in December, Douglas Uggah Embas, the country's commodities minister, said on Wednesday.
The market is up 4.3 percent this month, its biggest rise since September, as production is likely to remain affected well into the first quarter of 2015. "The nearby months have a premium to the forward months because the flood issue is so severe that people are expecting disruption to supply in the nearby months," said one palm oil trader with a foreign commodities brokerage in Malaysia. The benchmark March contract ended 0.8 percent lower at 2,267 ringgit ($649) per tonne by Wednesday's close. The contract climbed to 2,308 ringgit on Monday, its highest since November 4.
Palm recorded a 14.8 percent drop this year, its biggest decline since 2012, but losses were less steep than initially expected as fears of flooding crimping supply helped a recovery in prices that in September had plunged to five-year lows. Traded volume stood at 27,497 lots of 25 tonnes each, below the usual 35,000 lots. The Malaysian Palm Oil Association forecast crude palm oil production in Malaysia fell 21 percent in the December 1-20 period compared with a month earlier.
A group of millers in southern peninsular Malaysia estimated crude palm oil production between December 1-25 over the states of Johor, Pahang and Melaka plunged 37 percent from November, according to traders. Palm oil may retrace further to 2,245 ringgit per tonne, as it has pierced below support at 2,283 ringgit, according to Reuters market analyst Wang Tao. In vegetable oil markets, the most active May soybean oil contract on the Dalian Commodity Exchange rose 0.2 percent in late Asian trade, while the US soyoil contract for March fell 0.5 percent.