Malaysian palm oil futures extended its losing streak into a third day on Friday, as traders grew cautious ahead of a key US report on soybean plantings and stocks, although healthy demand for the edible oil curbed losses. Palm oil futures started the week strongly, going close to 3,500 ringgit on expectations of a shift in demand to the tropical oil as soybean supplies were tight in drought-hit South America.
But some gains were given up later on in the week as market players took profit ahead of the US Department of Agriculture's quarterly inventory report and planting forecast due later in the day. "Prices were down and it could be due to the market pricing in the USDA reports on plantings and maybe the market is not very optimistic about it," said Selena Leong, an analyst at DMG & Partners Research in Singapore.
Benchmark June palm oil futures on the Bursa Malaysia Derivatives Exchange lost 0.7 percent to close at 3,433 ringgit ($1,121) per tonne. This week the market went as high as 3,497 ringgit, a level unseen since March 10 2011. Traded volumes stood at 21,018 lots of 25 tonnes each, compared to the usual 25,000 lots.
Palm oil futures started the year strongly, ending off the first quarter with a 8.1 percent gain. Palm oil investors are watching the USDA planting reports to gauge soybean output for the coming months. Tighter soybean supply could boost demand for palm oil, which competes with crushed soybean oil in global market.
Traders are also expecting March exports to be higher than February as there appears to be steady improvement in buying interest for the tropical oil. Exports for the first 25 days of the month rose 6.6 percent, according to cargo surveyor Societe Generale de Surveillance.
Market players are also focusing on Malaysia's palm oil supply, which could be lower in March on the back of seasonality and the effect of biological stress. In other vegetable oil markets, the most active US soyoil contract for May gained 0.7 percent in Asian trade while the most active September 2012 soyoil contract on China's Dalian Commodity exchange was trading down 1.0 percent.