Malaysian palm oil slumps to 6-month low

Malaysian palm oil futures tumbled to their lowest in more than six months on Friday along with a broad sell-off in commodities as traders fretted over the state of the US economy and reduced risk taking. The sell-off, which started in US trading hours the previous day, has dragged on palm oil that has lost nearly 16 percent so far this year on a combination of weaker external markets, slow demand and a build-up in stocks.
Financial markets are still volatile ahead of the release of US monthly jobs data later in the day, which is expected to give a reading on the health of the world's largest economy. "Palm oil is getting much cheaper and we should eventually see a technical bounce as demand will start to come in, especially from China and India," said a trader with a foreign commodities brokerage in Kuala Lumpur.
Benchmark July palm oil futures on the Bursa Malaysia Derivatives Exchange fell as much as 81 ringgit, or 2.5 percent, to 3,148 Malaysian ringgit a tonne - a level unseen since November 23. The contract settled down 1.1 percent at 3,195 ringgit per tonne. Overall traded volumes stood at 32,482 lots at 25 tonnes each, much higher than the usual 25,000 lots.
For palm oil there may be further losses as the market expects closing stocks in No 2 producer Malaysia to hit a six-month high in April as strong production outpaced a modest increase in exports. "Crude palm oil price will hit below 3,000 ringgit per tonne as inventory levels are moving up closer to the psychological bearish 2 million tonnes mark," said an analyst with an investment bank. Cargo surveyors Intertek Testing Services and Societe Generale de Surveillance will issue Malaysia's May 1-10 palm oil exports on Tuesday. Industry regulator Malaysian Palm Oil Board will release April palm oil stocks data on the same day.
US soyoil for May delivery dropped 0.5 percent during Asian hours after sharp declines in the previous session although declines were muted by expectations of a smaller soy acreage compared to corn. The most-active January 2012 Dalian soyoil contract tumbled 2.3 percent.