Palm oil falls 2.7pc on weaker rivals, production outlook

SINGAPORE: Malaysian palm oil futures fell nearly 3% on Thursday as they tracked cheaper rivals on the Chicago Board of Trade (CBOT) and the Dalian Commodity Exchange and as market expects an increase in production.

The benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange fell 2.7% to close at 3,917 ringgit ($946.59). It erased some of the 3.4% gain posted on Tuesday.

"Palm oil is playing catch-up with external markets after a day of closure," a Kuala Lumpur trader told Reuters, adding expectations of better production were also putting pressure on prices.

The Bursa Malaysia was closed on Wednesday for the Vesak Day holiday.

Many analysts are expecting the buoyant CPO price trend to sustain only until the middle of this year before the price starts to ease, Joseph Tek Choon Yee, chief executive of IJM Plantations Bhd, said in a statement on Thursday.

"It is possible the current bullish run may not be sustainable as the seasonal crop production momentum picks up in the second half of the year," he said.

CBOT soybeans slid overnight, touching their lowest in more than a month, as prices were pressured by crop-boosting rains in the United States.

Its soybean oil contract was down 0.3% in afternoon Asia trade.

Dalian's soyoil contract and palm oil contract fell 1.8% and 2.4%, respectively.

Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.