Malaysian crude palm oil futures fell 3.6 percent on Tuesday, extending midday losses as the market tracked declines in other vegetable oils and crude prices hovered below $40 a barrel. Crude palm oil was one of the first commodities this year to feel the impact of the faltering world economy, tumbling 66 percent from a March peak of 4,486 ringgit a tonne.
Prices of palm oil could take a further beating as its use as a feedstock for biodiesel is less attractive with petroleum diesel retailing much cheaper, traders say. "The market came down because crude oil is back to around $39 and soybean oil has also fallen. But it was quiet. Many people are sidelined.
There are probably more selling opportunities than buying ones," a trader with a Malaysian commodities brokerage said. The benchmark March 2009 contract on Bursa Malaysia's Derivatives Exchange fell 58 ringgit to 1,530 Malaysia ringgit ($441.8) per tonne. Falls in other traded months ranged between 45 ringgit and 58 ringgit. Overall trade fell to 8,722 lots of 25 tonnes each from the usual 10,000 lots.
Traders said demand for palm oil will only flourish in the food sector, with cargo surveyors Intertek Testing Services and Societe Generale de Surveillance reporting over a 30 percent jump in shipments for December 1-20 to above 1 million tonnes.
US soyoil for January delivery was off lows in Asian trade, while the most-active May 2009 soybean oil contract on China's Dalian Exchange fell 1.4 percent. Vegetable oil markets move in tandem with crude oil as soyoil and rapeseed oil are heavily subsidised as feedstock for biodiesel, which competes directly with petroleum diesel.
INDONESIA PALM OIL TRADES: In Indonesia, the world's largest palm producer, the Jakarta-based state marketing centre said it only sold 1,000 tonnes out of 3,500 tonnes of palm oil offered in an auction at 5,358 rupiah ($0.49) per kg, compared to 5,394 rupiah per kg on Monday.
The centre, which normally sells palm oil from state plantations, said that due to Christmas and year-end holidays it will not hold any more palm auctions this year. The next auction will be on January 5, 2009. Indonesia's largest listed plantation firm PT Astra Agro Lestari also said it will not hold palm oil auctions from December 25 to January 2.
Producers in Medan - home to Belawan port, Indonesia's key port for palm oil exports - sold palm oil at 5,340 rupiah per kg on Tuesday. They did not hold a palm oil auction on Monday.
Meanwhile, refiners in Jakarta sold refined, bleached, deodorised (RBD) palm oil, used as cooking oil, at about 5,850 rupiah per kg, compared to 5,750 rupiah per kg on Monday. In Malaysia's physical market, crude palm oil for both December and January shipment in the southern region saw bids and offers at 1,550/1,560 ringgit. Trades were done at 1,560 ringgit.