Malaysian palm oil hits new two-week low

Malaysian palm oil futures hit a fresh two-week low on Friday as weak global economic sentiment overshadowed slowing production caused by seasonal decline in yields and La-Nina driven rains. Fears of a slowing global growth and a worsening euro debt crisis have seen palm oil futures notch five straight sessions of losses. An ongoing market correction played a part in the declines.
"The market has been rallying for more than 300 ringgit. So for the last few days, there had been some profit taking in the market," said a trader with a foreign commodities brokerage in Kuala Lumpur. "The market is also quite depressed because of the downtrends in external markets like Dalian and CBOT," he added. At closing, benchmark February palm oil futures on the Bursa Malaysia Derivatives Exchange dropped 1.2 percent to 3,069 ringgit ($964) per tonne. Prices fell as low as 3,050 ringgit, a level last seen on November 10.
Overall traded volumes stood at 19,505 lots of 25 tonnes each, much thinner than the usual 25,000 lots as investors stayed cautious ahead of a long holiday. Technicals turned slightly more bearish as Reuters analyst Wang Tao lowered his price target to 3,037 ringgit from the previous 3,050 ringgit per tonne, as indicated by a head-and-shoulders pattern. The Malaysian Meteorological Department website showed rains had cleared up in key oil palm growing areas for the time being.
But it had earlier kept an orange stage warning that heavy rains could persist till Friday and trigger floods in parts of Pahang - key oil palm growing area that accounts for 15 percent of production. Planters said November palm oil production may fall by 10-15 percent on heavy monsoon rains and a seasonal decline in yields. This may in turn provide support for palm oil prices as heavy rains tend to reduce harvesting rounds in oil palm estates and floods will complicate the transport of the edible oil to mills and refineries.
Exports have started to come off a little, cargo surveyor data showed, and any further declines may provide relief to tightening stocks. Cargo surveyor Intertek Testing Services said Malaysian exports for November 1-25 dropped 4.3 percent to 1.33 million, compared to the 1.40 million tonnes shipped out a month ago.
Another cargo surveyor Societe Generale de Surveillance reported a smaller decline of 1.7 percent on the back of solid Chinese orders. It said exports for the same period stood at 1.34 million, compared to 1.37 million tonnes a month ago. Oil prices fell on Friday as worries about Europe's debt crisis helped send the dollar to fresh highs against the euro, weighing against fears of European sanctions on Iranian crude oil. Unfavourable global sentiment stemming from the debt crisis weighed on other vegetable oil markets. US soyoil for December delivery lost 2.1 percent while China's most active May 2012 soybean oil contract dropped 1.9 percent.