Malaysian palm oil futures fell more than 2 percent on Thursday in the biggest drop in three months as the ringgit advanced and competing soyoil markets overseas weighed on sentiment. The Malaysian ringgit rose to its strongest in two weeks, turning away some overseas buyers from the ringgit-priced palm feedstock. "It's mainly because of the weaker overnight CBOT and strengthening of the ringgit," said Chee Wei Chan, a broker with Kenanga Deutsche Futures in Malaysia, referring to the Chicago Board of Trade.
The September palm oil contract on the Bursa Malaysia Derivatives exchange slid 2.4 percent to close at 2,236 ringgit ($603) a tonne, its steepest drop since March 17. The contract touched a session low of 2,235, its weakest since May 29. Chee said threats to palm yields from the El Nino weather phenomenon had yet to impact prices. El Nino's real effect "still hasn't kicked in", Chee said. "So a selldown from here is quite normal."
In soyoil markets, the US July soyoil contract dropped 0.7 percent, while the most-active January soybean oil contract on the Dalian Commodity Exchange lost 1.2 percent. Elsewhere, analysts said the US Food and Drug Administration's decision to ban artificial fats from a wide range of foods such as microwave popcorn and frozen pizza in three years may result in food makers switching to palm oil from soyoil.
However, the uptake in the tropical oil may not be significant enough to move prices. Palm, the world's most traded vegetable oil, is a naturally transfat-free edible oil. "Assuming 50 percent of the remaining estimated hydrogenated fats in the United States are replaced with palm oil, we estimate this could raise demand for palm oil in the United States by 156,000-453,000 tonnes over the next three years," said Ivy Ng, regional head of plantations research at CIMB Investment Bank.
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