Malaysian crude palm oil futures dropped on Thursday in cautious year-end trading, but losses were limited by worries that heavy rains may hit production in second-largest producer Malaysia. Weaker global markets also prompted investors to book profits as palm oil eased from a 5-week high on Wednesday, adding to its 16.7 percent loss this year.
Palm oil is set to post its first annual decline since 2008, weighed down by concerns the eurozone debt crisis could stall economic growth and commodity demand. "There's light profit-taking in the market, but it's going to be a wait-and-see game on the severity of the rainfall," said a dealer with a foreign commodities brokerage in Malaysia.
Benchmark March palm oil futures on the Bursa Malaysia Derivatives Exchange settled 0.9 percent lower at 3,155 ringgit ($1,000) per tonne. Prices touched 3,205 ringgit on Wednesday, a level unseen since Nov. 22. Traded volumes for palm oil futures stood at 15,694 lots of 25 tonnes each, much thinner than the usual 25,000 lots as traders were unwilling to take positions ahead of the new year holidays. But despite the loss, some traders were bullish on palm oil's outlook for next year.
"The bulls have both technical momentum and weather vagaries to propel prices higher. Against the backdrop of tight production prospects and slippage in South American crop, prices should be supportive in first quarter next year," said a trader with a local commodities brokerage in Malaysia. US soyoil for January delivery fell 0.6 percent amid weaker global markets while the most active Sept 2012 soyoil contract on China's Dalian commodity exchange was almost flat.