Malaysian palm oil futures fell from a four and a half year high in late trade on Friday, as it came under profit-taking pressure and corrected on softer rival oils on China's Dalian Commodity Exchange. Benchmark palm oil futures for March delivery on the Bursa Malaysia Derivatives Exchange was down 0.8 percent at 3,161 ringgit ($706) a tonne at the end of the trading day. Earlier in the session, the contract hit 3,202 ringgit, its strongest level since May 16, 2012.
Traded volumes were 59,976 lots of 25 tonnes each at the close of trade, above the 2015 average of 44,600 lots traded in a day. "There was some profit taking and a correction after three days of gains," a Kuala Lumpur-based trader said. "Dalian also softened later on." Palm earlier saw three consecutive sessions of gains this week, supported by a weaker ringgit and bullish government data from the Malaysian Palm Oil Board (MPOB) that showed declining output and lower-than-forecast inventory levels. The ringgit, palm's currency of trade, slipped 0.2 percent on Friday morning to 4.4720 against the dollar. Emerging market currencies have slumped on a rising dollar after the Federal Reserve raised interest rates by 25 basis points.
The US central bank also increased the number of projected rate hikes for 2017. A weaker ringgit makes palm oil cheaper for holders or foreign currencies. Palm prices are influenced by other vegetable oils, as they compete for shares in the global edible oils market. Gains on Dalian were softened in later trade, with the May soyabean oil contract on the Dalian Commodity Exchange up 0.4 percent, and the May contract for Dalian palm olein up 0.7 percent.
Industry regulator MPOB showed Malaysian palm production falling 6.1 percent in November, as the year-end monsoon rains disrupt the fruit-harvesting process. Heavy rains and flooding throughout the month is forecast to see further output declines in December. In related-vegetable oils, the January soyabean oil contract on the CBOT was down 0.1 percent.