Bloomberg News

Palm Oil Drops to Two-Week Low as Global Reserves Seen Climbing

November 28, 2012

Palm oil fell for a third day to the lowest level in two weeks on concern that stockpiles in Indonesia and Malaysia, the world’s largest producers, will expand as demand weakens.

The contract for February delivery lost as much as 1.1 percent to 2,367 ringgit ($776) a metric ton on the Malaysia Derivatives Exchange, the lowest price since Nov. 14, and ended the morning session at 2,372 ringgit in Kuala Lumpur. Futures are headed for a third monthly decline.

Production in Indonesia will climb 8 percent to 28 million tons in the year that started started on Oct. 1, according to a unit of the U.S. Department of Agriculture. Inventories reached a record 2.51 million tons in October, according to the Malaysian Palm Oil Board. Shipments from Malaysia fell 1.8 percent to 1.28 million tons in the first 25 days of November from a month earlier, Intertek said on Nov. 26.

“The bearish factor for palm oil is high stocks, both in Malaysia and Indonesia,” said Chandran Sinnasamy, trading head at LT International Futures (M) Sdn. in Kuala Lumpur. “It would need five to six months to clear the stocks and prices need to fall to attract demand.”

Palm oil may be the best-performing agricultural commodity in 2013 as demand rebounds after this year’s price plunge, Rabobank International said yesterday. Futures may trade at 2,700 ringgit a ton by the fourth quarter of 2013, compared with an expected average of 2,360 ringgit this quarter, analysts led by Luke Chandler said in a report.

Indonesia is discussing changes to its export tax policy to counter Malaysia’s plan to lower tariffs on crude palm oil shipments from Jan. 1, Agriculture Minister Suswono told reporters in Bali today. A decision will be taken soon, he said.

Soybean oil for delivery in January dropped 0.2 percent to 50.25 cents a pound on the Chicago Board of Trade. Soybeans for January delivery were little changed at $14.4775 a bushel.

Palm oil for May delivery declined 0.2 percent to 6,730 yuan ($1,082) a ton on the Dalian Commodity Exchange. Soybean oil for the same month lost 0.3 percent to 8,548 yuan a ton.

To contact the reporter on this story: Supunnabul Suwannakij in Bangkok at ssuwannakij@bloomberg.net

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


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