Palm oil slips on economic concerns, higher exports eyed

Palm oil has lost about 19 percent so far this year thanks to a stock build up and financial markets turning volatile over the grim outlook in the United States and Europe and efforts by central bankers to prop up these economies.

"The market is clearly following overseas developments but given that Malaysia is on holiday most of next week, we will see traders evening out their positions this week," said a dealer with a foreign commodities brokerage.

By midday, the benchmark November crude palm oil contract on Bursa Malaysia Derivatives dropped 0.5 percent to 3,053 ringgit ($1,029.51). The previous day the contract touched a one-week high of 3,070 ringgit.

Overall traded volume was light at 5,462 lots of 25 tonnes each, compared to the usual 12,500 lots.

Traders are betting on Malaysian exports continuing their solid growth in August as India restocks on imported edible oils and mostly Muslim Pakistan shops at the last minute ahead of the Eid festival at the end of this month.

Malaysian palm oil exports are up 13-14 percent to 1.17 million tonnes so far in August and cargo surveyors Intertek Testing Services and Societe Generale de Surveillance are likely to report strong data.

"But there are some in the market who are saying that exports may only rise marginally for the full month given the holidays next week," said another Malaysian trader.

Palm oil exports maintaining last month's high levels will still cut into stocks as production slows with plantation workers in top growers Indonesia and Malaysia taking extended leave for Eid celebrations.

Grains and other vegetable oil prices came under pressure from profit-taking after an equity market rally -- fuelled by speculation that the US Federal Reserve will signal moves to support the economy -- lost steam.

US soyoil for September delivery rose 0.1 percent, and the most active May 2012 soyoil contract on China's Dalian Commodity Exchange edged up 0.3 percent.

Copyright Reuters, 2011