Malaysian palm oil futures fell more than 1 percent on Monday, as renewed worries about euro-one debt weighed on risk sentiment and helped push prices lower. The benchmark August crude palm oil contract on the Bursa Malaysia Derivatives exchange closed 1 percent lower at 3,355 ringgit ($1,113) a tonne.
Earlier on Monday, prices briefly matched a near six-week high from Friday at 3,407 ringgit. Traded volumes stood at more than a two-week high at 17,205 lots at 25 tonnes each, compared with a total of 12,297 lots from Friday. "It is a sentiment thing - there is a lot of uncertainty in Europe, so this is hitting equity markets which is spewing over into palm oil," said a trader.
Debt worries hammered European markets on Monday, knocking both the euro and regional shares down 1 percent while also weighing heavily on world equities, sending emerging markets down nearly 2 percent. Crude oil futures slipped more than $3 on Monday as the dollar surged to a two-month high versus the euro due to debt worries in Europe.
"The pressure is coming from concerns about the strength of economic recovery," said Commerzbank analyst Eugen Weinberg. "Euro worries are definitely the name of the game and dampening the prices of most commodities." Palm oil, used in products such as food, cosmetics, tyres and biofuels, has slipped about 11 percent so far this year, although last week erased some of the losses seen over the last three months as exports play catch up with growing production.
"The market has had a good run so far despite seasonally strong output," said an analyst. "There could be some profit-taking taking place now as fundamental support for CPO remains somewhat scanty." The most-active January 2012 soyoil on the Dalian Commodity Exchange traded at 10,124 yuan versus an open at 10,190 yuan.
Showers in Argentina's farming areas caused some delays in the country's 2010/11 soy harvest, the government said in its weekly report on Friday, although most of the crop has already been brought in. ICDX's August CPO futures contract was at 9,730 rupiah per kg, compared to 9,840 rupiah per kg when it opened. Market volume was 2,104 lots of 10 tonnes each.
Late on Friday Indonesia said it would keep its palm oil export tax unchanged in June at 17.5 percent. The palm oil tax aims to ensure domestic requirements are met in Southeast Asia's biggest economy and to reduce volatility in local cooking oil prices.
Also on Friday, Indonesia revealed a long list of exemptions to a two-year moratorium on logging on Friday, a concession to the hard-lobbying plantation industry in the world's top palm oil producing nation. "We foresee an overall neutral impact on the planters under coverage as the slower expansion of new palm oil areas is offset by potential higher values for existing palm oil estates and landbank and stronger CPO prices in the medium term," said CIMB analysts in a note.