Malaysian palm oil futures slid to a five-and-a-half year low on Friday due to fears of rising vegetable oil supply and lower demand, resulting in its biggest monthly loss since September 2012. The benchmark November contract on the Bursa Malaysia Derivatives Exchange shed 2.5 percent to 1,930 ringgit ($613) per tonne by the close. For the week, the contract fell 3.5 percent to post its fourth straight week of losses.
Prices in August have plunged 14.5 percent, their biggest monthly drop in nearly two years. Total traded volume amounted to 59,300 lots of 25 tonnes, much higher than the average 35,000 lots. Investors rushed to take positions ahead of a long weekend, pushing prices as low as 1,926 ringgit, their lowest since March 20, 2009. "As palm oil hit a multi-year low, it attracted speculators who see value in the price to go long on the commodity, as they try to catch a falling knife," a Singapore-based palm trader said.
Malaysian markets will be closed on Monday for Independence Day holiday. From a technical perspective, Malaysian palm oil may fall as low as 1,920 after breaking support at 1,950 ringgit, driven by a wave 5, said Reuters market analyst Wang Tao. Malaysia's Sime Darby Bhd sees palm oil prices trading at 1,900 to 2,200 ringgit a tonne in the next four months due to forecasts of bumper soybean crops in the United States, lagging biodiesel uptake and a rise in palm oil stocks in both Malaysia and Indonesia.
Mohd Bakke Salleh, the group CEO and president at the world's top oil palm planter by acreage, added that initial fears of damage to crops from the El Nino weather phenomenon had also subsided, adding to price pressure. Malaysian overseas sales of palm oil products have been lacklustre so far in August. Shipments in August 1-25 fell 11-15 percent from the same period in July, due to poor take-up in Europe and China.
Forecasts of good-to-excellent crop ratings for soybeans have pressured palm prices. Bumper supplies of soybeans for crushing into soyoil would channel food and fuel demand away from palm. The US soyoil contract for December lost 0.4 percent in late Asian trade. The most active January soybean oil contract on the Dalian Commodities Exchange fell 0.1 percent.