Palm oil down in early trade on rising output forecasts

KUALA LUMPUR: Malaysian palm oil futures dipped in early trade on Monday on expectations that official production data due later this week will show rising output in July.

The benchmark palm oil contract for October delivery on the Bursa Malaysia Derivatives Exchange fell 0.5 percent to 2,596 ringgit ($606.68) by the midday break.

Traded volumes stood at 14,474 lots of 25 tonnes each at noon.

"The market was down as it was expecting higher production data for July," said a futures trader from Kuala Lumpur.

"But now we are hearing production gains in August will taper off," he added.

Another trader said sentiment was dampened by some profit taking and position squaring in anticipation of higher production and stocks.

A Reuters poll of nine traders, planters and analysts forecast that Malaysian output in July will rise 11 percent to 1.68 million tonnes, leading to 6.5 percent rise in inventory levels to 1.63 million tonnes.

Official data from industry regulator the Malaysian Palm Oil Board (MPOB) is scheduled for release on Thursday.

Palm oil production shows seasonal gains in the second half of the year, but industry players still expect the lingering effects of a crop damaging El Nino to affect yield.

In related oils, the October soybean oil contract on the Chicago Board of Trade was down 0.3 percent, while the January soybean oil on the Dalian Commodity Exchange gained 0.5 percent.

The January palm olein contract edged up 0.2 percent.

Palm oil is still targeting a range of 2,579-2,590 ringgit per tonne, according to Wang Tao, a Reuters market analyst for commodities and energy technicals.