Malaysian crude palm oil futures ended flat on Tuesday as traders were divided between lower export demand and expectations of heavy rains disrupting output in south-east Asia. Palm oil is however set to see a 21 percent decline in 2011, weighed down by a debt crisis in Europe where policymakers failed to boost resources at the International Monetary Fund by a targeted 200 billion euros, stirring fears the funds will not be enough to contain the crisis.
Sentiment in Asian financial markets was quite fragile following the death of North Korea leader Kim Jong-il that raised concerns of regional instability. Palm oil traders also kept an eye out for hot weather in South America curbing the soy crop that is crushed into competing soyoil.
"External factors are in play. It is still a range play for palm oil at 3,005 ringgit to 3,020 ringgit with no direction," said a trader with a local commodities brokerage. Benchmark March palm oil futures on the Bursa Malaysia Derivatives Exchange ended unchanged at 3,020 ringgit ($950) per tonne after going as low as 2,997 ringgit. Traded volumes stood at 17,272 lots of 25 tonnes each, compared with the usual 25,000 lots as some investors were closing out positions ahead of the year-end. Malaysia's weather office has warned of heavy rains in key oil palm growing state of Johor that accounts for a fifth of national output.
Production is already coming down partly due to seasonally weaker yields and the market expects output to fall more than 18 percent this month. Cargo surveyor Intertek Testing Services reported a 10.1 percent drop in exports to 933,553 tonnes in December 1-20 compared to the same period a month ago due to a decline in orders from mainly India.
Another cargo surveyor, Societe Generale de Surveillance reported a 10.5 percent decline. US soyoil for January delivery climbed 0.8 percent in Asian trade despite scattered showers in Brazil and Argentina that will do little to break the dry spell affecting soy crops. The most active September 2012 soyoil contract on China's Dalian commodity exchange slipped in the wake of palm oil's earlier fall in the session.