Bloomberg News

Palm Oil Drops as Soybeans Decline on U.S. Planting Progress

May 02, 2012

Palm oil declined for a second day, dropping to the lowest level in more than a month, after a U.S. government report showed that farmers accelerated soybean planting, easing concerns about dwindling cooking-oil supplies.

The July-delivery contract fell 0.6 percent to close at 3,452 ringgit ($1,140) a metric ton on the Malaysia Derivatives Exchange, the lowest settlement price for the most-active contract since March 30.

About 12 percent of the soybean crop was planted as of April 29 in the U.S., compared with the previous five-year average of 5 percent, a Department of Agriculture report showed April 30. Planting may total 73.902 million acres, down 1.4 percent from last year, the USDA said March 30. The oilseed can be crushed to make soybean oil, which competes with palm oil for use in food and fuels.

“The favorable planting report shows that it’s on schedule,” Donny Khor, senior vice president for futures and options at OSK Holdings Bhd. (OSK), said by phone from Kuala Lumpur. Increased U.S. planting will have a negative impact on palm oil as it closely tracks the soybean market, he said.

Soybeans for July delivery fell 0.5 percent to $14.9575 a bushel on the Chicago Board of Trade, while soybean oil for the same month gained 0.6 percent to 55.21 cents per pound.

Palm oil has rallied 8.7 percent this year on concern soybean crops in South America will decline, cutting global cooking-oil supplies. Futures reached 3,628 ringgit a ton on April 10, the highest level since March 2011.

‘Improved Exports’

“This consolidation and correction phase is likely to continue,” Khor said. “Even with the improved export numbers, it’s not able to hold the gains.”

Malaysia’s palm oil exports rose 9.4 percent to 1.35 million tons in April compared with 1.23 million tons the previous month, surveyor Intertek said April 30. Shipments climbed 10.4 percent to 1.34 million tons, estimated Societe Generale de Surveillance.

Palm oil for September delivery dropped 0.5 percent to close at 8,730 yuan ($1,384) a ton on the Dalian Commodity Exchange, the lowest closing price for the most-active contract since March 30. Soybean oil for the same month lost 0.8 percent to close at 9,864 yuan.

To contact the reporter on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net


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