Malaysian palm oil dropped to a two week low on Friday and notched its worst weekly loss in more than two years after a massive earthquake hit Japan, adding to a bleak global economic outlook. Palm oil lost 8.1 percent this week after industry regulator reported that stocks in No.2 producer Malaysia rose to a two-month high on unexpectedly strong production and higher imports.
The quake struck just before the close of Tokyo stock trading but other global markets came under further pressure as investors moved to "safer assets".
"The falls in palm oil follow the risk aversion trend in the wake of the Japan earthquake. The fundamentals of weak demand and higher production leading to a stock build are still intact," said a trader in Kuala Lumpur.
The benchmark May crude palm oil contract on Bursa Malaysia Derivatives dropped as much as 3 percent to 3,356 ringgit ($1,146), a level unseen since Feb. 24. The market ended at 3,364 ringgit.
Traded volume more than doubled to 33,383 lots of 25 tonnes each, compared to the usual 15,000 lots. A Reuters technical analysis showed Malaysian palm oil may end the current correction above 3,336 ringgit per tonne next week, and resume its uptrend, based on its wave pattern.
Market players said end-March stocks could rise 7 to 8 percent higher this month on the back of recovering output since cargo surveyors showed exports in first ten days of this month fell by double-digits.
US soyaoil for May fell 1.9 percent in Asian trade hours on estimates for a record soy crop from Brazil, the US Department of Agriculture report showed, although forecasts for US soybean ending stocks were unchanged. In China, the most-active September soyaoil contract on Dalian Commodity Exchange fell 0.6 percent on prospects of higher global vegetable oils supply and concerns another round of interest rate hikes if inflation remain high.
"After the three-day palm oil conference in Malaysia, investors are pretty confident with palm oil supply outlook," said an oil analyst based in China's soybean-producing province of Heilongjiang.