Malaysian palm oil futures fell to a near two-week low on Monday, after planters' estimates showed steady palm output in the second largest producer, countering expectation of a fall. The impetus for foreign buying from a weaker ringgit was offset by losses in crude and soyoil markets, traders said.
The Malaysian Palm Oil Association, a group of growers, forecast that total February crude palm oil output in the key palm exporter at 1.16 million tonnes, unchanged from January, as poor yields from Borneo regions were compensated by robust growth in Peninsular Malaysia.
Borneo's top growing palm states Sabah and Sarawak make up about half of Malaysia's total palm production. The estimates are against market expectations for output to drop 3 percent to 1.13 million tonnes - the weakest in four years - after monsoon floods hindered harvesting and the Lunar holidays in mid-February cut the number of harvesting days.
"The growers' full month estimates for February are slightly above market estimates, which means that there was really good production even though it was a short month," said a trader with a foreign commodities brokerage in Kuala Lumpur. "With that, people are anticipating the same rising production growth to continue in March also," the trader added. Official data from the Malaysian Palm Oil Board will be released on Tuesday.
The benchmark May contract on the Bursa Malaysia Derivatives Exchange closed down 0.7 percent at 2,269 ringgit ($617) a tonne, after touching 2,253 ringgit in late trade, their lowest since February 25. Total traded volume stood at 56,365 lots of 25 tonnes, much higher than the usual 35,000 lots.
The trader added that there were also rumours of weaker export data between March 1-10, ahead of cargo surveyor data also due Tuesday. Robust US jobs data late last week also helped the dollar soar to an 11-1/2 year peak against a group of currencies, pushing the ringgit down 1.0 percent to 3.6900 against the greenback - its weakest since March 2009.
While that made the ringgit-priced palm feedstock cheaper for overseas buyers, the gains in the dollar hurt commodities denominated in the currency such as crude oil. Brent crude oil fell towards $59 a barrel on Monday as the dollar strengthened and a supply glut pushed global oil inventories to record highs. In competing vegetable oil markets, the most active May soybean oil contract on the Dalian Commodity Exchange fell 0.3 percent in late Asian trade. The US soyoil contract for May was nearly flat. Cheaper crude and soyoil prices, typically tracked by palm, could shift food and fuel demand away from the tropical oil.
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