Malaysian palm oil futures closed down on Wednesday as traders booked profits from a one-year high hit the previous day, although losses were limited by news of larger food imports by China and soybean crop damage in South America. Palm oil has gained 9.4 percent so far this year with 3,500 ringgit level within striking distance although many in the market say the run-up is too speculative.
Commodity traders are facing a choppy week as the focus turns to the US Department of Agriculture's quarterly inventory report and planting forecast due on Friday. "Market players are looking out for the USDA reports on Friday. At the same time, food demand from China is quite strong as it is replenishing its stocks," said a trader with a foreign commodities brokerage in Malaysia.
Benchmark June palm oil futures on the Bursa Malaysia Derivatives Exchange edged down 0.2 percent to close at 3,473 ringgit ($1,134) per tonne. Prices touched a more-than-one-year high level of 3,497 ringgit on Tuesday. Traded volumes stood at 20,004 lots of 25 tonnes each, thinner than the usual 25,000 lots as investors were wary ahead of the Friday reports. A healthy demand outlook for palm oil was supported by the latest Malaysian export data, which pointed to a moderate improvement in exports for the first 25 days of March.
Analysts said that the effect of biological stress could kick in soon after 12 months of a strong production up-cycle and that could lower palm oil production. In other vegetable oil markets, the most active US soyoil contract for May gained 0.1 percent in Asian trade after China snapped up US soy cargoes following tight supplies in drought-hit south America. The most active September 2012 soyoil contract on China's Dalian Commodity exchange was trading 0.2 percent lower.