KUALA LUMPUR: Malaysian crude palm oil futures fell on Tuesday as traders expect soyoil supplies to swell on the incoming South American soy harvest.
Palm oil, which competes with soyoil for use in food and fuel, could breach the 3,200 ringgit level although traders say the downside is limited as prices have become attractive for big buyers like China and India.
"Palm oil has followed the declines in Chicago soyoil as ample supply becomes more apparent. This has prompted the technical players to sell down, probably to 3,200 ringgit," said a trader with foreign commodities brokerage in Kuala Lumpur.
By midday, benchmark June crude palm oil contract on the Bursa Malaysia Derivatives dropped 1.4 percent to 3,236 ringgit ($1,069) per tonne, after going as low as 3,217 ringgit.
Overall trade stood at 10,598 lots at 25 tonnes each, higher than the usual 7,500 lots.
Palm production will move to a higher cycle from the first quarter of this year after two years of weak yields and erratic weather, a scenario that will pressure prices.
"It will not be surprising if Malaysian palm oil production will jump 15 percent at least in March. The end stocks will be replenished with the production increase and the slow demand currently," said another trader in Malaysia.
The market tends to follow Malaysian palm oil industry data as Indonesia, the world's No. 1 producer, does not issue regular or reliable statistics.
Societe Generale de Surveillance and Intertek Testing Services are due to issue Malaysia's March exports on Thursday and traders expect volumes to reach 1.15 million, a tad higher than 1.1 million tonne levels seen in February.
Other vegetable oils fell as crude oil eased for a fourth day after Libyan rebels, with the help of Western-led air strikes, pressed forward against embattled leader Muammar Qadhafi.
US soyoil for May delivery fell 0.5 percent on record Paraguay soy crop and investor caution ahead of the US Department of Agriculture's planting intentions report due later this week.
A Reuters poll found US farmers will plant fewer acres to soybeans this year than they did last year, but seedings could be the third largest ever and grow even larger if seeding delays force farmers to switch out of other crops.
The most-active Sept 2011 soyoil on China's Dalian Commodity Exchange lost 0.7 percent on external markets with traders saying the government's reserve sale of over 91,000 tonnes of rapeseed oil had little market impact.
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