Malaysian palm oil futures dropped to their lowest level in nearly two weeks on Wednesday, hit by better-than-expected output forecasts and weak export demand. The palm oil contract for June delivery on the Bursa Malaysia Derivatives Exchange lost 1.2 percent, falling to 2,722 ringgit ($695) per tonne at the end of the trading day. Earlier in the session the contract hit 2,708 ringgit, its lowest since March 25.
Traded volumes were 48,993 lots of 25 tonnes each, above a 2015 daily average of 44,600 lots. "Some expect better production in April, and exports are not promising," said a trader based in East Malaysia, adding that the market expects March output to grow 8-10 percent month-on-month. A Reuters poll had forecast March output to rise 8 percent from a month ago, in line with seasonal trends, ahead of official data scheduled for release on Monday. But production is seen coming in at its weakest for the month since 2007 due to a crop-damaging El Nino.
Industry experts have forecast El Nino's dry weather effects would reduce global output by 2-3 million tonnes, pushing prices up to 3,000 ringgit per tonne by June. Technical charts show palm oil is facing resistance at 2,776 ringgit, according to Reuters analyst Wang Tao. But, palm oil shipments are expected to take a hit in April after Malaysia raised its crude palm oil export duty to 5 percent from zero, its first hike in nearly a year.
In competing vegetable oil markets, the May Chicago Board of Trade soyoil contract dropped 0.3 percent, while the September soybean oil contract on the Dalian Commodity Exchange lost 1.5 percent. The offer price for crude palm kernel oil fell to 5125.73 ringgit per tonne on Wednesday evening, according to price assessments by Thomson Reuters.