Palm oil drops on export demand concern

Palm oil, poised for the sixth monthly advance in seven, declined on speculation that costlier prices may reduce export demand from Malaysia, the second- largest producer after Indonesia.

The July-delivery contract fell as much as 0.3 per cent to RM3,488 (US$1,143) per metric ton on the Malaysia Derivatives Exchange and traded at RM3,493 at 12:06 p.m. in Kuala Lumpur.

Prices, poised for a 1.7 per cent gain this month, have rallied 20 per cent since the end of September.

Malaysian exports fell 2.9 per cent to 1.04 million tons in the first 25 days of April compared with the same period in March, Intertek said on April 25. Shipments lost 1.9 per cent to 1.03 million tons in the period, according to Societe Generale de Surveillance.

"If you want people to buy aggressively, prices have to come down," Gnanasekar Thiagarajan, a director at Commtrendz Risk Management Services Pvt. Ltd., said by phone from Mumbai. "At these levels, neither India nor China will be comfortable buying unless there is some kind of crisis."

Palm oil has rallied on increased export demand and concern that harvests of soybeans from South America may decline, hurting global edible-oil supplies. The most-active contract reached 3,628 ringgit on April 10, the highest since March 2011.

"Some support will come from a lower South American soybean crop," Thiagarajan said. The oilseed can be crushed to make soybean oil, which competes with palm oil for use in food and fuels.

Soybeans for July delivery climbed 0.4 per cent to $14.86 a bushel on the Chicago Board of Trade and soybean oil for the same month was little changed at 55.79 cents per pound. Soybeans reached $14.9675 on April 25, the most expensive since 2008.

Palm oil for September delivery was little changed at 8,782 yuan ($1,392) a ton on the Dalian Commodity Exchange. Soybean oil for the same month was also little changed at 9,944 yuan. - Bloomberg