Palm drops on weaker soyoil, higher production outlook

KUALA LUMPUR: Malaysian palm oil futures on Monday posted their worst session in a week, as it tracked weaker performances in rival oils.

Traders showed bearish sentiments on forecasts of rising output, but are uncertain about how much production will be recorded in the coming months.

The benchmark palm oil contract for October delivery on the Bursa Malaysia Derivatives Exchange was down 1.2 percent at 2,542 ringgit ($593.72) at the midday break.

Traded volumes stood at 11,359 lots of 25 tonnes each at noon.

"The market fell tracking weaker soybean oil, as well as on concerns over higher production in the coming weeks," said a Kuala Lumpur-based futures trader.

He added that uncertainty over the extent of output gains has resulted in lower traded volumes on Bursa.

Palm oil production in Malaysia, the second-largest producer after Indonesia, is seen rising in the-second half of the year, in line with seasonal trends and is expected to peak in October.

Production for 2017 is estimated to reach between 18.7 million tonnes and 19.5 million tonnes, up around 10 percent from levels in 2016, but below the record high of 19.96 million tonnes hit in 2015.

Palm oil prices also track the movements in rival edible oils, as they compete for a share in the global vegetable oils market.

The December soybean oil contract on the Chicago Board of Trade declined up to 1.1 percent, following forecasts of rains across the US Midwest which is expected to aid crops.

In other related oils, September soybean oil on the Dalian Commodity Exchange was down 1.3 percent, while the September palm olein contract dropped 1.9 percent.

Palm oil is biased to retest a resistance at 2,591 ringgit per tonne, a break above which could lead to a gain to the next resistance at 2,605 ringgit, according to Wang Tao, a Reuters market analyst for commodities and energy technicals.