Malaysian palm oil futures declined on Tuesday evening, their first drop in three sessions, weighed down by a stronger ringgit and forecasts of rising production. The ringgit, the currency of trade for palm oil, rose to its highest in six months against the dollar and was last up 0.3 percent. A stronger ringgit typically makes palm oil more expensive for holders of foreign currencies.
The benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange was down 1.7 percent at 2,617 ringgit ($609.74) a tonne at the close of trade. Traded volumes stood at 40,143 lots of 25 tonnes each on Tuesday evening. "The market traded lower on a stronger ringgit today," said a Kuala Lumpur-based trader, adding that expectations of rising production also put pressure on the market.
Traders added that the market later saw sharper declines on weaker performing related oils on China's Dalian Commodity Exchange and on a correction. Palm oil output in Malaysia, the world's second largest producer of the tropical oil, rose 5.7 percent from a month earlier to 1.5 million tonnes in April. Production is seen further rising in the coming months, in line with seasonal trend and as trees recover from a crop-damaging El Nino weather pattern.
The benchmark palm oil contract is biased to break a support at 2,642 ringgit per tonne and fall to the next support at 2,600 ringgit, according to Reuters market analyst for commodities and energy technicals Wang Tao. In other related vegetable oils, soyabean oil on the Chicago Board of Trade was down 0.9 percent, while the September soyabean oil contract on the Dalian Commodity Exchange fell 0.9 percent. The September contract for palm olein declined 1.2 percent. Palm oil prices take direction from rival edible oils such as soyaoil, as they compete for a share in the global vegetable oils market.