KUALA LUMPUR: Malaysian palm oil futures dropped on Thursday, in line for a second straight day of declines, on weaker related edible oils and bearish market outlook on palm prices and inventory levels.
The benchmark palm oil contract for May delivery on the Bursa Malaysia Derivatives Exchange was down 0.4 percent at 2,148 ringgit ($526.21) a tonne at midday break.
Weaker edible oils on China's Dalian Commodity Exchange and overnight soyoil on the U.S. Chicago Board of Trade weighed on palm prices, a Kuala Lumpur-based trader said.
Recent price forecasts at an industry conference were not very bullish, while inventory levels were not declining as much as expected, another trader said.
"For now, we cannot see how stocks will fall," said the trader, adding that Malaysian inventories are not dropping as much as expected.
"I don't know what the situation will be like if they don't fall in the next two months." Palm oil end-stocks in Malaysia, the world's second-largest producer of the edible oil, is forecast to slightly fall by 1.7 percent to 2.95 million tonnes in February from the previous month, according to a Reuters poll.
Inventories had climbed to a record 3.2 million tonnes in December. <MYPOMS-TPO>
The Reuters survey had also pegged February output at 1.6 million tonnes, 8 percent lower than the previous month, and forecast exports to dive 14 percent to 1.44 million tonnes.
At an industry conference on Wednesday, leading analyst James Fry had forecast for benchmark palm oil prices to trade between 2,240 ringgit and 2,360 ringgit in 2019 amid sluggish growth in global output and higher drawdowns in reserves as biodiesel consumption rises.
Meanwhile, another leading industry analyst Thomas Mielke said Malaysian palm oil futures are set to rise to trade between 2,350 ringgit and 2,450 ringgit in four to six months.
In other related oils, the Chicago March soybean oil contract fell 0.7 percent on Wednesday, but was last up 0.1 percent on Thursday.
U.S. corn and soybean futures fell roughly 1 percent in the previous session and wheat slipped nearly 3 percent on sluggish export demand for U.S. grains and a lack of news on U.S.-Chinese trade negotiations.
The May soyoil contract on the Dalian Commodity Exchange declined 1.3 percent and the Dalian May palm oil contract fell 1.2 percent.
Palm oil prices are affected by movements in soyoil, as they compete for a share in the global vegetable oil market.
Palm oil is biased to break a support at 2,140 ringgit per tonne, and fall to the next support at 2,117 ringgit, said Wang Tao, a Reuters market analyst for commodities and energy technicals.
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