Palm oil touches new one-year low as economic woes grip markets

KUALA LUMPUR: Malaysian palm oil futures touched a fresh one-year low on Tuesday as investors fled commodity markets on concerns Greece may be unable to avoid a default that could unleash a financial crisis and drag the world into a recession.

Palm oil prices, which have lost more than a quarter so far this year, have come under further pressure on expectations of high stocks and concerns that demand will lose steam after India ends its festival season this month.

"Nothing looks good around the corner from here. For the palm oil planters they are still making a good profit at these levels," said a trader with a foreign commodities brokerage.

"I won't be surprised if we fall below the 2,800 ringgit level," he added.

Benchmark December palm oil futures on the Bursa Malaysia Derivatives Exchange fell as much as 1.5 percent to 2,801 ringgit ($874.029) a tonne, the lowest since Oct. 8 last year. The contract settled down at 2,810 ringgit.

Overall traded volumes stood at 25,612 lots of 25 tonnes each from the usual 25,000 lots.

Reuters analyst Wang Tao said palm oil has resumed a medium-term downtrend towards 2,781 ringgit per tonne, based on a Fibonacci projection analysis.

The sell-off in palm oil could attract last minute orders from India ahead of the Hindu festival of Diwali in late October, as well as from China, which will need to restock after the National Day public holidays this week.

"After the Asian festival season and restocking, consumers could buy on a hand to mouth basis because of the global economic uncertainty," said another trader in Malaysia.

Export demand may then do little to chip away at growing stocks in Malaysia as harvesters increase their collecting rounds in September after the holidays for the Muslim feast, Eid al-Fitr.

US soyoil for October delivery dropped 0.2 percent in late Asian trade, extending losses on rapidly harvested soy crop.

The US Department of Agriculture reported on Monday that farmers had harvested 19 percent of the soybean crop compared with just 5 percent a week ago.

Copyright Reuters, 2011