Palm oil retreats from three-month high

Malaysian palm futures retreated from an over three-month high on Monday on worries of weakening demand, but losses were capped by a slump in the ringgit to a nine-year low and Malaysia's plans to lift its biodiesel mandate to 10 percent by October. The August palm oil contract on the Bursa Malaysia Derivatives exchange was down 0.3 percent at 2,333 ringgit ($619.49) a tonne by Monday's close, having eased from an intraday high of 2,362 ringgit, its highest since March 5.
Total traded volume stood at 36,762 lots of 25 tonnes each, just above the usual 35,000 lots. "Hearing of weak demand. Palm olein prices are under pressure," said a trader with a foreign commodities brokerage in Kuala Lumpur. Exports of Malaysian palm products in May had surged about 45 percent from a month ago, although some market players were doubtful that the strong demand can be sustained. The Malaysian ringgit hit 3.7680 per dollar late Monday, its lowest since January 2006, after robust US jobs data bolstered expectations of an interest rate hike by the Federal Reserve by the year-end.
Weakness in the Southeast Asian currency makes the ringgit-priced palm oil feedstock cheaper for overseas buyers. Malaysia, the world's second-largest palm grower plans to raise its biodiesel mandate to 10 percent by October this year, from 7 percent currently, plantation industries and commodities minister Douglas Uggah Embas said on Monday. The B10 programme is expected to consume 1 million tonnes of crude palm oil a year, the minister said.
The minister added that the six-magnitude quake which struck the Borneo state of Sabah on Friday did not cause major damage to palm plantations or mills. Sabah is Malaysia's biggest palm-growing state, and accounted for 31 percent of the country's total crude palm oil output of 19.7 million tonnes in 2014. The US Geological survey said the quake's epicentre was about 54 km (33 miles) from the state capital of Kota Kinabalu. In competing vegetable oil markets, the US July soyoil contract was down 1 percent by 1026 GMT, while the most active September soybean oil contract on the Dalian Commodity Exchange dropped 0.2 percent. Oil prices slipped on Monday after China's fuel imports dropped sharply and as markets digested an Opec decision to keep its production target unchanged, a move analysts said would keep the market oversupplied for the rest of the year.