Malaysian palm oil lost more ground on Wednesday, falling for a sixth consecutive session to its lowest since October 2009 as slowing exports and prospects of near-record US soybean production weighed on the market. Exports of Malaysian palm oil products for August 1-20 fell 5.39 percent to 822,026 tonnes from the 868,843 tonnes shipped during July 1-20, cargo surveyor Intertek Testing Services said.
According to cargo surveyor Societe Generale de Surveillance (SGS), palm oil product exports over the same period fell 8.3 percent. The benchmark November contract on the Bursa Malaysia Derivatives Exchange fell 0.9 percent to 2,049 ringgit per tonne by Wednesday's close. Traded volume stood at 36,920 lots of 25 tonnes, slightly above the daily average of 35,000 lots.
"It is all the negative news which is pulling prices lower," said one Kuala Lumpur-based trader. "Exports are down and global commodity prices are under pressure." Chicago soybeans dipped for a second session as a closely watched crop tour reported near-record yields in key US oilseed-producing states. The US Department of Agriculture in a report on Monday rated the soybean crop condition as 71 percent good-to-excellent, up from 70 percent a week earlier.
The downtrend in palm prices would likely continue "until all the negative newsflows are over," CIMB Investment Bank plantations analyst Ivy Ng said, adding that reports of weak palm exports, weakening soybean prices and crude prices had all hit palm prices. "Palm is just dragged along with that." Any recovery from the downturn would probably be subdued during the peak-production season, Ng said, adding that this would last until around mid-November.
"Currently, the bargaining power is with the buyers because they see crops are coming out and they think they can afford to wait a bit and still get good prices," Ng said. "Nobody is going to buy and hold because it's very costly to hold onto this commodity." Malaysian palm oil production is likely to rise in the months ahead as trees enter their peak production period, adding to rising global supplies of edible oils.
On the technical front, palm oil is expected to decline further to the 323.6 percent level, or 2,016 ringgit per tonne, having fallen through support at 2,046 ringgit, according to Reuters market analyst Wang Tao. The most active January soybean oil contract on the Dalian Commodities Exchange slipped 0.5 percent while the US soyoil contract for December gave up 0.4 percent.