Malaysian palm oil futures fell on Thursday, after reaching a new 18-month high, on concerns of slowing demand after data showed exports declined. The benchmark palm oil contract for March on the Bursa Malaysia Derivatives Exchange fell 0.6 percent to 2,480 ringgit ($578.09) a tonne at the end of the trading day. The contract reached 2,508 ringgit earlier in the session, the highest since June 25, 2014.
Malaysian palm futures gained 9.5 percent for the year due to concerns that dry weather caused by the El Nino weather phenomenon will reduce palm fruit harvests. Palm also rose as Indonesia's biodiesel mandate is seen creating additional demand for the tropical oil. It will raise the minimum bio content in diesel fuel to 20 percent in 2016 from the current 15 percent.
Exports from Malaysia, the world's second largest palm oil producer after Indonesia, have been falling as demand from top consumers China and India slows down. Data from cargo surveyor Intertek Testing Services on Thursday showed a 5.4 percent fall in shipments for the full month of December compared with November, while Societe Generale de Surveillance registered a 5.9 percent fall.
"On the fundamental side, even though production is down, people are concerned about exports," said a trader from Kuala Lumpur. "There's also some speculation and profit taking on year-end covering, it will probably resume again next year." Traded volume stood at 46,294 lots of 25 tonnes each at the close of trade. In competing vegetable oil markets, the US January soyoil contract is down 0.2 percent while the May soybean oil contract on the Dalian Commodity Exchange gained 0.6 percent.
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