Palm Oil Posts Biggest Weekly Drop in Seven Months on Soybeans

September 5, 2009 9:02 UTC+8

Palm Oil Posts Biggest Weekly Drop in Seven Months on Soybeans

Palm oil posted the biggest weekly decline in seven months on concern a record U.S. soybean harvest will push soybean oil prices lower, encouraging substitution.

The U.S., the world’s largest soybean grower and exporter, may harvest as much as 3.372 billion bushels in the marketing year that began Sept. 1, Informa Economics Inc. said yesterday. That compares with a government estimate of 3.199 billion bushels and FCStone Group Inc.’s forecast of 3.266 billion.

“Palm oil prices have been dragged down” by reports of the record harvest, Ivy Ng, an analyst at CIMB Securities in Kuala Lumpur, said by phone. “There’s been some short-term news flow that’s not favoring a further uptrend in prices.”

November-delivery palm oil dropped 1 percent to 2,197 ringgit ($623) a metric ton on the Malaysia Derivatives Exchange, completing a decline of 7.3 percent this week, the biggest since the week ended Feb. 20.

Palm oil and soybean oil, the world’s two most-consumed edible oils, are used in food and bio-fuel production.

Soybean oil for December delivery gained 0.2 percent to 34.72 cents a pound in after-hours electronic trading on the Chicago Board of Trade at 6:09 p.m. Singapore time. The futures, down 5.4 percent this week, were headed for the biggest tumble since the week ended July 10.

Inventory Outlook

Palm oil exports from Malaysia, the world’s second-biggest producer, fell 7.9 percent to 1.298 million tons in August from a month earlier, according to data tracked by Societe Generale de Surveillance and released Sept. 1.

Intertek, another independent surveyor, said Sept. 1 it tracked shipments of 1.33 million tons of palm oil from Malaysia, down 4.9 percent from a month earlier.

Falling exports may lift stockpiles, analysts say. Official August data will be released by the Malaysian Palm Oil Board next week.

Palm oil stockpiles in Malaysia, the world’s second-biggest producer, dropped in July for the first time in three months to 1.33 million tons on an export surge, the board’s data showed.

“Any correction in crude palm oil prices from here is likely to be limited,” supported by “a likely month-on-month pick-up in August 2009 crude palm oil inventory levels for Malaysia,” according to a report by JPMorgan Securitites (Malaysia) led by Simone Yeoh, a plantation analyst in Kuala Lumpur.

She forecasts inventory rising to more than 1.4 million tons, which will still be 20 percent below the same month last year. She maintained her average forecast of 2,450 ringgit in the second half of this year.