Malaysian palm oil futures touched a seven-month low on Thursday, as comparative oils and expectations of higher second half production in Southeast Asia weighed on prices. The benchmark September crude palm oil contract on the Bursa Malaysia Derivatives Exchange settled down 1.3 percent to 3,136 ringgit ($1,037) a tonne after hitting its lowest level since November 23, 2010, at 3,130 ringgit.
"Essentially a recovery in the yields will cause prices to normalise after some weather problems earlier this year," a Singapore-based analyst said. "We expect prices to fall to a low between 2,600-2,700 in the fourth quarter." Palm oil investors expect production to rise in the second half of 2011 in Southeast Asian producing countries, which make up more than 90 percent of global output.
Stocks in Malaysia are expected to rise above a 16-month high of 1.92 million tonnes hit last month. While this could draw in more demand, production levels are key. Traded volume for the September contract was 5,741 lots of 25 tonnes each, versus 15,700 lots on Wednesday. Also helping pull prices lower was Tuesday's move by top palm oil producer Indonesia, which said it would lift its palm oil export tax in July to 20 percent.
Traders say this would lead Indonesian producers to step up exports of palm oil before July. Prices partly reversed earlier losses, however, with sentiment from short-term demand expectations, as the Muslim festival of Ramazan approaches in August. On Monday, data showed that exports of Malaysian palm oil products for June 1-20 rose 22 percent to 969,804 tonnes from 794,322 tonnes shipped during May 1-20. In related markets, oil fell more than $1, reversing the previous session's gains, as a rise in the dollar overshadowed a surprise draw in gasoline stockpiles in the world's top consumer, the United States.
US soyoil for July delivery dipped in Asian trade, while the most active January 2012 soybean oil contract on the Dalian Commodity Exchange fell 0.6 percent. "The Chinese government still controls the prices of packaged edible oil in the market, therefore producers are slowing down their output due to a narrowing margin, resulting in increasing stock pressure," said Zhan Zhi Hong, an oil analyst with China's Merchant Futures in Shenzhen. "Prices were further pressured by uncertainties in the global and domestic economy," she added. "The soyoil market is looking for new leads to set direction."