Malaysian crude palm oil futures fell 0.6 percent on Wednesday, extending losses since last week as lower prices of rival soyoil and expectations of swelling reserves due to weak demand weighed on the market.
The benchmark September contract on the Bursa Malaysia Derivatives Exchange settled down 14 ringgit, or 0.6 percent, at 2,334 ringgit ($670) a tonne after reaching an intra-day low of 2,315 ringgit.
"The perception is that demand will fall further and production will be maintained, leading to an increase in stock," said a trader. "And it is really bringing down the market along with overnight losses in soyoil."
Other traded months fell between 6 ringgit and 25 ringgit except for the September 2008 contract, which was marginally up. Overall trade slipped to 8,332 lots of 25 tonnes each from the 12,000 lots that change hands on a routine day.
Palm oil is almost 16 percent off a historic high of 2,764 ringgit reached earlier this month due to robust demand from top importers India and China and dwindling stocks at home.
September palm oil on Singapore's Joint Asian Derivatives Exchange slid $6 at $672.50 a tonne with distant months mixed in light trade. Indonesia is likely to maintain an export tax on palm oil at 6.5 percent for the next 2-3 months to see its effectiveness in lowering local prices, Bayu Krisnamurthi, deputy to the chief economics minister, said.
The Southeast Asian nation recently raised the export tax on crude palm oil to 6.5 percent from 1.5 percent and palm oil by-products to 6.5 percent from 0.3 percent to ease local prices. Soyoil futures at the Chicago Board of Trade ended lower on Tuesday, hovering near technical selling levels.
In electronic trading during Asian hours, the July contract fell further. Soyoil prices often move in step with palm oil due to common use in products ranging from lipstick and candies to biofuels.
In Malaysia's physical market, crude palm oil for June shipment in the southern region was quoted at 2,480/2,490 ringgit a tonne. Trades were done at 2,490 ringgit.