Malaysian crude palm oil staged its sharpest decline in a single day on Friday, tumbling more than 6 percent as market talk that Indonesia could delay its plan to raise vegetable oil export tax triggered panic selling.
The sell-off in palm oil also affected other edible oil markets, with Chicago soyoil falling 1.76 percent during Asian hours and Indian soyoil down in cautious trade.
China's Dalian soyoil and Indonesian palm oil also fell.
The benchmark August contract on the Bursa Malaysia Derivatives Exchange was down 174 ringgit, or 6.6 percent, to 2,471 Malaysian ringgit ($713) a tonne.
"It's a massive killing, players are going all out to take profits," said S. Paramalingam, director of trading company Pelindung Bestari Sdn Bhd.
"It's a classic, domino situation - one starts to sell out and the rest follow, scared to make any losses."
The palm oil market also pulled down plantation stocks like IOI Corp The plantation index slipped 0.25 percent to 6310.67. Some traders said the market was oversold and likely to bounce back on Monday. "It was not just profit-taking, it was panic selling as everyone wanted to save whatever they could from gains in the past few days," another trader said.
"The market is oversold and I think it will recover." Palm oil, largely used as a cooking oil but also in products ranging from lipstick to biodiesel, hit a new high of 2,764 ringgit on Wednesday. The state-run Malaysian Palm Oil Board will release May output, stocks and export numbers on Monday, when cargo surveyors will unveil June 1-10 export numbers.
The commodity is still up close to 24 percent since January on dwindling supplies and robust demand from top importers India and China. It surged 40 percent last year on demand from the biodiesel and food sectors. Other traded months fell between 65 and 165 ringgit. Total volume more than doubled to 25,438 lots of 25 tonnes.
The September contract on the Joint Asian Derivatives Exchange (JADE) fell $20 to $730 a tonne. JADE, a collaboration between the Chicago Board of Trade and the Singapore Exchange, made its debut on Wednesday with US dollar-denominated crude palm oil.
Indonesia said it was considering raising palm oil export tax to 6.5 percent if local crude palm oil prices stayed above 7,000 rupiah a kg until end June, Trade Minister Mari Pangestu said on Thursday. Indonesian producers said they were trying to sell palm oil in the local market at cheaper prices to ensure that an increase in export tax could be avoided.
"We are working hard to make it work so that nothing happens," said Derom Bangun, executive chairman of the Indonesian Palm Oil Producers Association. Traders in India said they would wait and watch. "There is huge profit-taking, so let us see how the market behaves on Monday," said Atul Chaturvedi, vice-president of Adani Exports Ltd. In Malaysia's physical market, crude palm oil for June shipment was quoted at 2,750/2,800 ringgit a tonne. Trades were done at 2,800 ringgit.