Malaysian palm oil futures fell half a percent on Thursday as concerns over a looming global debt crisis and improved weather for parched US soy crops prompted investors to cut back positions. A possible US credit rating downgrade has weighed on financial markets, adding to weak sentiment in palm oil futures that have lost 18 percent so far this year.
A turn to better crop weather in the US as well as bearish estimates for ample palm oil supply from top industry analyst Dorab Mistry further pressured the vegetable oil markets. "Sentiment is really weak. We could be seeing more profit taking in the days to come but the hot weather has started to hurt soy yields in the US," said a trader with a foreign commodities brokerage in Kuala Lumpur. The benchmark October contract on the Bursa Malaysia Derivatives Exchange ended 14 ringgit lower at 3,116 ringgit ($1,058.963) per tonne after going as low as 3,085 ringgit.
Traded volumes were light at 17,833 lots of 25 tonnes each, compared to the usual 25,000 lots as investors remained cautious. Technicals were negative. Reuters analyst Wang Tao said Malaysian palm oil will fall further to 3,064 ringgit per tonne, as it has dropped below a rising channel.
Leading palm oil analyst Dorab Mistry said the market could drop as low as 2,800 ringgit in September as stocks in Malaysia remain stubbornly high. US soyoil for August delivery rose 0.3 percent on Thursday, reversing losses from the previous session, with little help from improved China demand for soybeans although favourable weather in the United States capped gains.
China is likely to start importing more soybeans and vegetable oils from July after weak purchases in past months, said a Hamburg-based oilseeds analysts Oil World on Tuesday. The most active May 2012 soyoil on China's Dalian Commodity Exchange fell 0.7 percent.