Malaysian palm oil futures fell on Wednesday and hit a new eight-month low as investors factored in a higher output cycle and worries about weaker demand in the second half of the year. The benchmark September crude palm oil contract on Bursa Malaysia Derivatives closed 0.4 percent lower at 3,029 ringgit ($1,006) a tonne. Earlier, prices touched a low at 3,016 ringgit - a level not seen since October 27, 2010.
Traded volume for the September contract was 13,473 lots of 25 tonnes each, versus 13,871 lots on Tuesday. "The underlining tone is still an overhang by the potential of near-record end stocks," said a Malaysia-based trader. "The market is still technically very weak." Malaysian palm oil stocks are likely to have risen 11.3 percent to near record levels in June as strong production and imports outpaced local and overseas demand, a Reuters poll showed on Tuesday.
Palm oil prices fell almost 20 percent in the first half of this year, pressured by expectations for stocks to soar above 2 million tonnes at a time when output in Southeast Asia is growing and overseas demand is likely to slow. Industry regulator Malaysian Palm Oil Board will issue official data on palm oil output, stocks, imports and exports on Monday. "Crude oil is quite firm, and bean oil is holding quite well - that's the reason why palm oil is holding," said a second Malaysia-based trader.
"There is a fear that stocks will go above 2 million tonnes," he added. "But because of external factors, the market is still holding above 3,000." US crude oil futures turned up on Wednesday, recouping earlier losses after a Moody's decision to cut Portugal's credit rating to "junk" status revived investor concerns about Europe's debt problems. In other vegetable oils, US soyoil for July delivery dipped, while the most active January 2012 soyoil contract on China's Dalian commodity was steady.
"As always, weather is the key thing to watch and this has had an impact on the market," said Chris de Lavigne, palm oil analyst at Frost & Sullivan. ICDX's September CPO futures contract was at 8,765 rupiah per kg, compared to 8,755 rupiah per kg when it opened. Market volume was 1,612 lots of 10 tonnes each.