Palm hits one-week low on concerns over rising output

KUALA LUMPUR: Malaysian palm oil futures saw a sharp decline on Wednesday, hitting their lowest in a week, weighed down by expectations of rising production and tracking weaker performances in related edible oils.

The benchmark palm oil contract for October delivery on the Bursa Malaysia Derivatives Exchange dropped 1.2 percent to 2,621 ringgit ($611.60) at the midday break. Earlier in the session, it touched 2,617 ringgit, its weakest since July 26.

Traded volumes stood at 21,656 lots of 25 tonnes each at noon.

"The palm market is down tracking weaker soyoil and RBD (refined bleached deodorized) palm olein," said a futures trader from Kuala Lumpur, referring to soyoil on both the Chicago Board of Trade and China's Dalian Commodity Exchange, and Dalian palm olein.

Traders say forecasts of rising output contributed to market concerns, ahead of the official July data to be released next week by Malaysian Palm Oil Board.

"I don't think production will go up a lot," said a futures trader, as palm trees are still facing the lingering effects of the 2015 crop-damaging El Nino.

Production in Malaysia, the second-largest producer of the tropical oil, is seen to rebound in July in line with seasonal trend and on a post-El Nino recovery.

In other related oils, the October soybean oil contract on the Chicago Board of Trade climbed up to 0.4 percent. In the previous session, it saw a 2.4 percent decline after the US Department of Agriculture rated 59 percent of the US soy crop in good-to-excellent condition.

The September soybean oil on the Dalian Commodity Exchange was up as much as 1.2 percent, while the September palm olein contract fell up to 1.4 percent.

Palm oil prices are impacted by related edible oils, as they compete for a share in the global vegetable oils market.

Palm oil may retrace more to 2,623 ringgit per tonne, as it failed to break a strong resistance at 2,703 ringgit, said Reuters market analyst for commodities and energy technicals Wang Tao.