Malaysian palm oil futures plummeted in Thursday's trade, as stronger production fuelled concern about growing stockpiles amid soft demand, while weakness in rival oils compounded the bleak picture. The benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange charted its largest intra-day drop in four weeks, dropping 2 percent to 2,449 ringgit ($600.83) a tonne, clocking a third straight session of falls.
Trading volumes stood at 53,109 lots of 25 tonnes each. A Kuala Lumpur-based trader said demand has not been promising, and the market was wary of rising stocks.
"Market is reacting towards production figures. It's looking like production pace is on the rise, which will likely add pressure on stocks," the trader said. The drop in production has been narrowing, from a 7.3 percent fall for the December 1-15 period to a 2.6 percent drop for December 1-20 versus the same periods in the prior month, data from the Southern Palm Oil Millers' Association on Thursday showed.
Inventory levels in Malaysia rose to their highest in nearly two years, by 16 percent to 2.56 million tonnes, while exports for November fell 11.9 percent on-month, data from the Malaysian Palm Oil Board last week showed. Demand from Europe and China, key regions for palm oil exports, typically dwindles at the end of the year, as colder weather in the northern hemisphere solidifies the tropical oil.
Another trader said production is showing signs of outpacing demand, and tumbling rival vegetable oil prices have also exerted further pressure on palm. "Overall the market lacked positive news. It's more about cutting loss, heavy long liquidation ahead of holidays," the trader said.
In other related edible oils, the January soyabean oil contract on the Chicago Board of Trade slid 0.8 percent, while the May soyabean oil contract on the Dalian Commodity Exchange was down 1.7 percent. The Dalian January palm olein contract fell 1.8 percent.
Palm oil prices are affected by movements in other edible oils, as they compete for a share of the global vegetable oils market.