Malaysian palm oil futures dive three percent

Malaysian crude palm oil futures ended 3.4 percent lower on Wednesday, pulled down by the exchange regulator's new measures to curb speculative trading. Dealers said the market, which plunged more than 8 percent during the morning session, recovered because of strong buying.
The benchmark third-month August contract on the Bursar Malaysia Derivatives Exchange finished down 83 ringgit, or 3.4 percent to 2,350 ringgit ($677) a tonne, after touching an intrude low of 2,235 ringgit.
Bursa Malaysia raised gross margin rates on all contracts, prompting concern among traders that new measures will make hedging more expensive. "The market is now at a near meltdown because of these regulations," said a trader.
"Players feel that they will be at a disadvantage over the higher gross margin rates." Bursa Malaysia increased the gross margin rates for the spot month crude palm oil and palm kernel oil contracts to 7,000 ringgit a lot of 25 tonnes each from 4,900 ringgit, an exchange official said.
Other months, it raised the margin rates to 6,750 ringgit a lot from 4,800 ringgit. The new rates take effect from Thursday. Dorab Mystery, a director of Godrej International Limited, said palm oil prices are expected to trade between 2,200-2,400 ringgit a tonne over the next one month.
"The market has done enough for the time being. It did an excellent job of killing the demand but now we are in danger of an overkill," Mistry told Reuters in an interview. "A fair value based on current fundamentals for the third-month position in my opinion should lie between 2,200 and 2,400," he said.
Traders said Mystery's comments could help to stabilise the market, which has lost nearly 15 percent since it hit record highs of 2,764 ringgit last week. "The comments will help get rid of this volatility which is not good for the market in the long run," said a leading trader.
Other traded months fell between 22 and 149 ringgit, except the March 2008 contract, which was up 24 ringgit. Overall trade more than tripled to 37,231 lots of 25 tonnes each.
September palm oil on Singapore's Joint Asian Derivatives Exchange (JADE) fell $39.00 to $643.00 a tonne. Exports of Malaysian palm oil products for June 1 to 10 fell 27 percent to 339,117 tonnes from 463,865 tonnes shipped between May 1 and 10, cargo surveyor Interlake Testing Services said on Monday. Another cargo surveyor, Society General de Surveillance, said exports during the period fell 23.5 percent to 345,849 tonnes.
In Malaysia's physical market, crude palm oil for June shipment in the southern region was quoted at 2,430/2,450 ringgit a tonne. Trades were done between 2,420 and 2,450 ringgit.