Malaysian palm oil futures fell on Friday, ahead of export data that may show an improvement in demand at a time when supplies are tightening. Vegetable oil supplies have been limited by heavy rains in palm oil-producing Indonesia and Malaysia and dry weather hitting soyaoil-exporting Argentina, fuelling prices to multi-month highs and raising food shortage fears.
"Production won't improve much during the second half of this month because of heavy rains. We have to watch out for news about floods in Sabah on the island of Borneo and the east coast of mainland Malaysia," said a trader in Kuala Lumpur. "Palm oil was oversold yesterday, so there was a technical correction in the morning, but traders may liquidate their positions further."
The benchmark March 2011 crude palm oil contract on Bursa Malaysia Derivatives ended down 0.4 percent to 3,680 Malaysian ringgit ($1,205) a tonne. Overall traded volume rose to 22,663 lots of 25 tonnes each, compared to the usual 15,000 lots. A Reuters technical analysis suggested palm oil will rebound to 3,760 ringgit, based on its wave pattern and a Fibonacci projection analysis.
Investors are waiting for cargo surveyors to issue Malaysian export data for the first fifteen days of January over the weekend and on Monday, which may show an improvement from the same period a month ago. Cargo surveyors have reported declines in December exports as buyers shunned palm oil, since the tropical oil tends to crystallise in colder weather and also due to higher prices.
US soyaoil for January delivery inched down in Asian hours after posting solid gains in the previous session on concerns over tight supplies of soyabeans for crushing. The most active September 2011 soyaoil contract on China's Dalian Commodity Exchange fell 0.4 percent. "Although vegetable oils demand is high, trading was quiet before Lunar New Year on fears that more controls will be imposed to halt price rises," said Zhang Juan Cong, an oil analyst with Dadi Futures in China's southern city of Hangzhou.
China has asked edible oil refiners to freeze prices to retailers for the first quarter of this year, released vegetable oil reserves and ordered commodity exchanges to raise margin requirements over the past few weeks in a bid to rein in prices.