KUALA LUMPUR: Malaysian palm oil dropped on Monday from a five-month high hit last week on concerns buying was overdone, while the euro zone debt crisis and an apparent failure by the US politicians to agree on a deficit reduction plan also hurt sentiment.
The palm oil market was still above 3,200 ringgit on strong exports data issued by a cargo surveyor and concerns of the developing La Nina-driven rains that may stall harvesting in top producers Indonesia and Malaysia.
"The market is divided between potentially bullish fundamentals and the overwhelming global economic scenario. But there is some profit-taking today as the market has been overdone," said a trader with a foreign commodities brokerage.
By the midday break, benchmark February palm oil futures on the Bursa Malaysia Derivatives Exchange dropped 1.2 percent at 3,208 ringgit ($1,014.387) per tonne. Prices touched a peak of 3,270 on Friday, a level not seen since June 15.
Overall traded volumes stood at 7,643 lots at 25 tonnes each, compared to the usual 12,500 lots as demand in the cash market was slow for the day.
The market is bracing for low production in the last quarter due to a seasonal decline in yields and the prospects of a La Nina weather condition making the seasonal monsoon rains worse, hampering harvesting.
Some traders said Malaysian palm exports will continue to be strong as buyers like China, India and Pakistan are restocking after major festivals in the third quarter.
"The threat of supply disruption is also spurring more orders and we could see solid November export numbers," said another trader in Malaysia.
Exports of Malaysian palm oil products for Nov. 1-20 rose 0.6 percent to 1,037,923 tonnes from 1,031,953 tonnes shipped during Oct. 1-20, cargo surveyor Intertek Testing Services said.
Another cargo surveyor Societe Generale de Surveillance will issue its estimates later in the day.
Brent crude futures edged above $107 a barrel on Monday on fears that tensions over Iran's nuclear programme, and clashes in Egypt and Syria, may disrupt Middle Eastern output as demand rises ahead of the Northern Hemisphere winter.
Higher crude limited losses in other vegetable oils that were down on global economic concerns. US soyoil for December delivery and China's most active May 2012 soybean oil contract slipped 0.2 percent.
The Dalian soy bean oil market has been weaker today as it is dragged down by the CBOT market which recently hit its one-year low," said Huang Zhi Qiang, an analyst with Guotai & Junan.
"Market is mostly bearish because of the European situation and this is not expected to change soon... even with rumours saying that China is importing more American beans," the analyst added.
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