Malaysian crude palm oil futures fell as much as 4.3 percent to a new 10-month low on Monday, as faltering energy and vegetable oil markets encouraged a sell-off, despite good export data from cargo surveyors. Vegetable oil prices, which have slipped more than 12 percent this year, may drop even further on a combination of weaker crude oil prices, bumper crops for soybeans and palm oil.
The benchmark October contract on the Bursa Malaysia Derivatives Exchange fell as much as 120 ringgit to 2,659 ringgit a tonne ($805), a level not seen since October 11, 2007. The contract then settled down 108 ringgit at 2,671 ringgit. "The 2,500-ringgit level is dangerously looming ahead," said a trader with a foreign commodities broker.
He added: "In terms of fundamentals, there may appear to be stronger exports and a slow reduction in stocks but this is overwhelmed by strong influence of weak crude oil and soyoil." Oil rebounded more than $1 on Monday on supply disruption fears, clawing back some gains from last week's sharp declines but soybean complexes at Chicago Board of Trade and Dalian Commodity Exchange continued to falter.
The August soyoil contract fell 0.8 percent in CBOT, amid expectations of better crop reports from the USDA on Tuesday. The most-active January 2009 soyoil contract in Dalian fell by its daily limit. Good key data on palm oil exports and stocks were largely ignored by the market, although some analysts pointed out a slowdown in stocks was imminent.
"Towards the fourth quarter, production would have softened because the oil palm trees would have undergone considerable stress after months of high yields," said James Ratnam, an analyst with TA Securities. Malaysia's crude palm oil stocks fell 2.8 percent to 1,977,060 tonnes in July, more than the 2.2 percent fall estimated in a Reuters poll.
But the strength in exports will not run down stocks so quickly, other analysts and traders said. Cargo surveyor Intertek Testing Services reported on Monday exports of Malaysian palm oil products for August 1-10 rose 14.9 percent to 407,922 tonnes while Societe Generale de Surveillance saw an increase 23.2 percent to 401,800 tonnes.
INDONESIA FOLLOWS SUIT Indonesian crude palm oil prices fell on Monday, tracking the weak Malaysia market. In Jakarta, the state marketing centre sold crude palm oil at 6,953 rupiah ($0.758) a kg, a 4.2 percent drop from 7,265 rupiah a kg Last week. Palm oil producers in North Sumatra's Medan - home to Belawan port, which is the key port for palm oil exports - did not hold any auction.
Refiners in Jakarta sold RBD palm olein, used as cooking oil, steady at 7,750 rupiah a kg as weakening rupiah against the US dollar offered support. In Malaysia's physical market, August and September crude palm oil was offered at 2,700/2,720 ringgit in the southern region. Trades were unquoted by the end of the afternoon session.