By Claire Leow April 5 (Bloomberg) -- Palm oil futures declined, erasing earlier gains, on concern a record soybean crop will reduce the need for substitutes. June-delivery futures on the Malaysia Derivatives Exchange declined 1.1 percent to close at 2,530 ringgit ($784) a metric ton. The price rose as much as 1.1 percent in intraday trading. “There is a lot of soybean supply coming on to the market and this is bearish for prices,” said Arhnue Tan, an analyst at ECMLibra Investment Research. The combination of “two opposite factors -- declining stock levels at home and ample supplies of soybeans -- together should push crude palm oil prices into a tighter trading range.” Palm oil may trade between 2,200 ringgit and 2,700 ringgit “depending on which news dominates when,” she added. Soybean oil in Chicago advanced 0.5 percent to 39.17 cents a pound at 6:06 p.m. Singapore time. That leaves it trading at a premium of $79.40 a ton to palm oil, according to Bloomberg data. On March 31, the premium narrowed to $60.81, the lowest since Nov. 7, 2007, reducing the appeal of palm oil, its substitute. U.S. farmers may plant a record 78.098 million acres (31.6 million hectares) with soybeans this year, 0.8 percent more than last year, the U.S. Department of Agriculture said March 31. The average estimate of 31 analysts surveyed by Bloomberg News was 78.5 million acres. Brazil’s soybean processors on March 12 raised thee crop forecast for the current marketing year by 3.7 percent to 67.6 million tons. Palm oil stockpiles in Malaysia, the second-largest grower, dropped a second month to 932,970 tons in February, according to the nation’s palm oil board. Figures for output, exports and reserves in March are expected on April 10. Export Estimates Preliminary estimates by two cargo surveyors show rising exports for March. Shipments rose 7.7 percent to 1.35 million tons from the previous month, independent cargo surveyor Societe Generale de Surveillance said March 31. Exports rose 12 percent to 1.35 million tons, Intertek said on the same day. Production in Malaysia peaked in October and has dropped in the subsequent four months. The first quarter’s output is seasonally low and analysts are watching if production picks up while Southeast Asia is experiencing dry weather associated with the El Nino weather phenomenon that can cause oil palms stress. With rising crude oil prices, “the trading range of 2,500 ringgit to 2,600 ringgit is still good,” Ryan Long, a futures trader at OSK Investment Bank Bhd., said today. Crude oil in New York advanced as much as 1.2 percent to $85.89 a barrel in Asian trading today. It gained 6.4 percent last week. Palm oil prices are increasingly supported by energy prices as demand for biofuels rises. In China, the largest edible oils user, September-delivery palm oil rose 0.5 percent to 6,880 yuan ($1,008) a ton on the Dalian Commodity Exchange. Dalian soybean oil added 0.3 percent to 7,600 yuan a ton. China will encourage its companies to import rubber, palm oil and mineral products from Indonesia and boost investment in the Southeast Asian country, Chen Deming, China’s commerce minister, said in Jakarta on April 1, according to a statement on the ministry’s Web site. To contact the reporter on this story: Claire Leow in Singapore at cleow@bloomberg.net

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