BLBG: Palm Oil Ends Three-Week Rally as Recession Mars Demand Outlook
Palm oil futures dropped, ending a three-week rally, on concerns demand for the world’s cheapest edible oil will decline amid a protracted global recession.
Palm oil, used in food and fuel, gained 7.5 percent the past three weeks as its discount to rival soybean oil helped increase exports from Malaysia. A slowdown worldwide may cap further gains, analysts said.
“A deep and protracted global recession will impact overall demand,” which will weigh on palm oil prices, said Ong Chee Ting, an analyst at Maybank Investment Bank Bhd.
Palm oil for May delivery fell 1.4 percent to 1,945 ringgit ($530) a metric ton on the Malaysia Derivatives Exchange. Futures have slumped 46 percent in the past year on record production in Indonesia and Malaysia, the world’s two largest producers.
Soybean oil in Chicago for May delivery dropped 0.1 percent to 30.13 cents a pound at 5:56 p.m. Singapore time, making it 25 percent more expensive than palm oil, according to Bloomberg data. The discount has narrowed from a 12-month average of 43 percent, “which caps palm oil’s upside,” Ong said. The two commodities are substitutes.
Palm oil prices may decline as low as 1,500 ringgit a ton in the second half when output is seasonally higher and supplemented by the U.S. soybean harvest, said analysts at conference in Kuala Lumpur last week.
Inventories Shrink
Meantime, output in Malaysia dropped for a second month in February to the lowest since June 2007, shrinking stockpiles 15 percent, the country’s palm oil board said March 11. Exports in the first 15 days of March rose 16 percent to 591,567 tons from with the same period the previous month, Intertek said today.
China’s imports of palm oil last month rose 54 percent to 410,000 tons from a year ago, data from the Beijing-based Customs General Administration today showed. India bought 34 percent more palm oil in February, or 432,152 tons, from a year earlier, the Solvent Extractors’ Association of India said today.
China also imported 15 percent more soybeans in the January- February period to be crushed for oil and meal for animal feed.
