Malaysian palm oil futures edged lower on Wednesday as worries over increased production and a stronger ringgit dampened buying.
"Strong growth in March and April production is seen as a bearish factor. The March Southern Palm Oil Millers Association figures released today showed and increase of a whopping 48 percent," a trader with a local commodities brokerage in Kuala Lumpur said.
By the day's close, the benchmark June contract on Bursa Malaysia Derivatives was down 0.51 percent at 2,152 ringgit ($582) a tonne. Total traded volume stood at 29,973 lots of 25 tonnes, below the average 35,000 lots.
"The SPOMA figures are having an impact. In April onwards, seasonal production will pick up, hence the outlook is weaker for the rest of the year," a second trader with a foreign commodities brokerage in Kuala Lumpur said.
Increased production without matching demand can lead to an abundance of palm oil in the market and drive down prices.
Prices also came under pressure from gains in the ringgit, which can curb interest from overseas buyers on the Malaysian market by making palm oil effectively more expensive.
Indonesia, the world's biggest producer of palm oil, will extend a 2011 ban on forest clearing beyond its May 2015 deadline, a government official said on Wednesday.
Technical charts show that palm oil is expected to test support at 2,146 ringgit per tonne, a break below which will lead to a further loss to 2,106 ringgit, Reuters market analyst Wang Tao said.
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