VEGOILS-Rising stocks to drag on palm oil futures

KUALA LUMPUR: Malaysian palm oil futures dropped on Thursday on
expectations of output rising this month that could lead to a stock
build-up, although losses were limited by expectations of strong Asian
demand and tight supply of competing soyoil.
Palm oil prices
have lost 8 percent so far this year thanks to the euro zone debt
crisis stirring concerns of weaker global growth and commodity demand.
In recent weeks, palm oil has dropped below 3,000 ringgit on rising
stocks.
"The market is bearish. There's no doubt about it
because fundamentally stocks are very high and there is no sign that
production is slowing down," said a trader with a local commodities
brokerage.
"Everybody knows at the back of their mind that
production is climbing higher towards the peak, maybe in October," the
trader added.
By the midday break, the benchmark November
contract on the Bursa Malaysia Derivatives Exchange slipped 0.3 percent
to 2,922 ringgit ($947.7) per tonne.
Total traded volume stood at 11,325 lots of 25 tonnes each, slightly lower than the usual 12,500 lots.
Technicals
showed palm oil will end its current rebound around a resistance at
2,960 ringgit per tonne and drop back to its Sept. 11 low of 2,874
ringgit, said Reuters market analyst Wang Tao.
Traders have said
the palm oil's widening discount to soyoil limit prices from falling as
consumers shift their purchases to the tropical oil produced in
Indonesia and Malaysia.
"Palm oil is now so much discounted
against soy bean oil with the cap reaching $300. The market is just
waiting for the time to bounce back and climb higher. Eventually,
demand will start setting in," said the trader.
For now, palm
oil's discount to soyoil could widen further after the U.S. Department
of Agriculture cut its estimate of the soybean crop in the world's top
grain-exporting nation.
The USDA pegged the soybean harvest at
2.634 billion bushels, down from last month's 2.692 billion and below
analysts' average estimate of 2.657 billion. Ending stocks next summer
were projected to be the lowest in nine years at 115 million, unchanged
from August' s estimate.
Brent crude steadied near $116 a barrel
on Thursday, as traders awaited a U.S. Federal Reserve policy decision
that is expected to include further stimulus action to bolster the
world's largest economy.
In other vegetable oil markets, U.S.
soyoil for December delivery rose 0.5 percent. The most active January
2013 soyoil contract on the Dalian Commodity Exchange rose 1.4 percent.
- Reuters