Malaysian palm oil lower on bleak global outlook

Malaysian palm oil futures ended lower in choppy trade on Monday, reversing gains made in the morning session on concerns that a gloomy global economic outlook will weaken prices. The benchmark contract had risen in early trade to touch 2,336 ringgit as wet weather lifted expectations that January output could be lower than expected, following flood warnings from Malaysia's weather bureau for parts of its top growing regions of Sabah and Sarawak.
"On the local front, there's the weather market at play and the currency factor that is supportive to palm oil," said a trader with a foreign commodities brokerage in Kuala Lumpur. "But on a more extensive global market, crude oil and most commodity prices are trading on the weak side. This is hanging over the market," the trader said, adding that the immediate support level for palm is at 2,300 ringgit.
The benchmark April contract on the Bursa Malaysia Derivatives Exchange had lost 0.1 percent to 2,304 ringgit ($645) per tonne by Monday's close. Total traded volume stood at 35,018 lots of 25 tonnes, just above the typical 35,000 lots. Palm oil futures may fall this year to their lowest level since February 2009 despite poor weather in the top growing countries. Trade may be volatile due to uncertainty in the global economy, senior industry officials said on Monday.
Drought in Indonesia and floods in Malaysia, which could damage crops, may cause tight supplies but any El Nino phenomenon this year will be weak and therefore not as damaging to output as feared, the officials told a conference in Kuala Lumpur. Crude palm oil output in Indonesia and Malaysia supply about 85 percent of the world's palm oil. An official from the Malaysian Palm Oil Board said that the Malaysian palm prices could even drop to as low as 1,820 ringgit this year, but may also rise to as high as 2,750 ringgit.
Elsewhere, Thailand plans to import around 50,000 tonnes of crude palm oil from February due to a domestic shortage caused by drought, using a 1.5 billion baht ($46 million) government fund. In other markets, Brent crude oil prices fell below $50 a barrel on Monday after Iraq announced record oil production and the global economic outlook darkened. In competing vegetable oil markets, the most active May soybean oil contract on the Dalian Commodities Exchange fell 0.7 percent.