Malaysian palm oil futures fell to a one-month low late on Monday, charting a second consecutive session of declines weighed down by expectations of weaker demand and stronger than expected output levels in the coming weeks. Traders also said the market was under pressure from a stronger ringgit, which usually makes the edible oil more expensive for foreign buyers. The ringgit gained 0.3 percent against the dollar on Monday evening at 4.0650.
The benchmark palm oil contract for May delivery on the Bursa Malaysia Derivatives Exchange dropped 2 percent at 2,212 ringgit ($544.16) a tonne at the close of trade, its lowest levels since Jan. 18.
Trading volumes stood at 39,281 lots of 25 tonnes each at the close of trade.
"The ringgit is stronger, and there is also higher production expected in February and March," said a Kuala Lumpur based trader.
While palm oil seasonally sees monthly production declines through the first quarter of the year, industry players are expecting output to register higher levels compared to last year.
Latest official data showed that palm oil output in Malaysia fell 3.9 percent in January to 1.74 million tonnes from the previous month. The levels, however, were higher than the 1.59 million tonnes of recorded production in January last year, and 1.28 million tonnes in 2017.
Another Malaysian trader said that talk of trade agreements between the US and China dampened market sentiment about palm oil.
"For me, this news is not so good for palm as China will buy soya, hence reducing their palm oil imports," he said.
President Donald Trump said on Sunday he would delay an increase in US tariffs on Chinese goods, thanks to "productive" trade talks and that he and Chinese President Xi Jinping would meet to seal a deal if progress continued.
The US Agriculture Secretary also said China had committed to buy an additional 10 million tonnes of US soyabeans.
China imports soyabeans to crush for meal to support its livestock industry, leaving soyaoil as a by-product and reducing the need to import palm.
Malaysian palm oil exports for the Feb. 1-25 duration fell 6 percent versus the corresponding period last month, reported AmSpec Agri Malaysia on Monday.
Another cargo surveyor Intertek Testing Services reported a 5.5 percent decline for the same time period.
The Chicago March soyabean oil contract rose 0.6 percent on Monday, supported by expectations of a trade agreement between Washington and Beijing.
In other related oils, the May soyaoil contract on the Dalian Commodity Exchange slightly rose 0.1 percent and the Dalian May palm oil contract was down 1.3 percent.
Palm oil prices are affected by movements in soyaoil, as they compete for a share in the global vegetable oil market.
Palm oil may break a support at 2,237 ringgit per tonne and fall towards the next support at 2,214 ringgit, said Wang Tao, a Reuters market analyst for commodities and energy technicals.