JAKARTA: Palm oil futures fell more than 2 percent to a near seven-week low on Monday, tracking other commodity markets lower as investors sold risky assets on fears governments had done too little to avoid a global recession.
Investors were bracing for a slowdown in demand for most commodities, including vegetable oils, after a week of news that included a downgrade of Italian debt, the third month of contracting Chinese factory data, and indices pointing to slow-growing business in Europe.
Benchmark December palm oil on the Bursa Malaysia Derivatives Exchange traded down 2 percent at 2,933 Malaysian ringgit ($925) a tonne. It had earlier dropped to 2,921 ringgit
-- the lowest since August 9.
"Palm oil is not immune," said a Singapore-based analyst on the economic jitters that are gripping financial markets. "We're seeing risk-aversion from markets that have been out-performing and those are the ones people sell first."
Traded volumes for the December contract stood at 8,892 lots of 25 tonnes each compared with 14,550 lots on Friday.
Among comparable oils, front month US soyoil slipped, while the most active May 2012 soybean oil contract on China's Dalian Exchange also fell to a multi-month low.
US crude futures fell more than $1 on Monday on concerns that euro zone policymakers were doing too little to stem a debt crisis that helped wipe as much as 9 percent off oil prices last week.
In vegetable oils, market players looked at events at the weekend Globoil conference in the Indian financial capital of Mumbai.
A brewing economic crisis in the developed world will weigh on palm oil prices that have lost 21 percent this year on high output, although the market could rally again on Asian demand and erratic weather, industry analysts said.
Exports of Malaysian palm oil products for September 1-25 fell 11.9 percent, cargo surveyor Intertek Testing Services said.
"Markets are all red again," said a Jakarta-based palm trader. "Currency also bad -- the US dollar up and rupiah down."
The euro fell to its lowest in a decade against the yen and zeroed in on an eight-month low versus the dollar, as riskier assets got hammered across the board while markets waited for more details on fresh efforts from European officials to tackle the debt crisis there.
Copyright Reuters, 2011
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