Malaysia's palm oil futures ended off a ten-day high on Monday on lower exports, underscoring fears that the global economy will slow with this month's earthquake and tsunami hitting Japan. Losses were limited as some traders picked up bargains after Japanese authorities took a major step in managing a nuclear crisis by connecting all six earthquake-damaged reactors to power supply.
"The focus shifted to exports. The headline news in Japan created a knee jerk reaction but the impact to the global economy needs to be seen and the export data today does not help much," said a trader in Kuala Lumpur. The benchmark June 2011 crude palm oil contract on Bursa Malaysia Derivatives rose to 3,489 ringgit ($1,143) a tonne, a level unseen since March 11. It then pared down gains, settling 0.8 percent lower at 3,420 ringgit per tonne
Overall volume stood at 20,732 lots at 25 tonnes each, up from the usual 15,000 lots. Exports of Malaysian palm oil products for March 1-20 fell 12.8 percent to 719,302 tonnes from 825,180 tonnes shipped during February 1-20, cargo surveyor Intertek Testing Services said on Monday.
Another cargo surveyor Societe Generale de Surveillance said exports for the same period fell 9.5 percent to 734,897 tonnes. Wider markets traded higher. Brent oil prices jumped more than 2 percent to top $116 a barrel on Monday as Western forces launched air strikes on Libya, while Asian shares advanced on bargain hunting in the wake of heavy losses last week.
Crude oil's gains, based on concerns that violence may compromise supplies, largely supported other vegetable oil markets. Although US soyoil edged higher, extending strong gains last week on investors regaining their risk appetite, China's most active September 2011 soybean oil contract gained nearly 1 percent.
"Last week, China's Ministry of Agriculture said soybean planting areas is going to shrink 11 percent and production from Brazil is expected to be lower, giving market strength to move upward," said Shanghai-based oil analyst. "Given the situation in Libya and the disaster in Japan, its hard to tell when market trading will stabilise. The market trend will get set after the USDA release planting data by the end of this month."
Soy farmers in Brazil's top soy-growing state Mato Grosso are struggling to harvest in heavy rains that have left fields soggy and cut the price of grains which are too damp. Estimates of US farmer planting intentions for 2011 crops are being closely watched as global supplies following disappointing harvests a year earlier.