BLBG: Palm Oil Extends Losses as Production Approaches Peak Season
Palm oil futures in Malaysia fell for a third day on concern increased supplies from the biggest producers of the commodity may make up for any reduction in supplies of rival soybean oil amid the swine flu outbreak.
Supply from Indonesia and Malaysia, which control 90 percent of the world’s palm oil production, are poised for a record year of output. That may offset a shortfall in soybean oil supplies if the swine flu outbreak leads to culling of pigs, paring demand for soybean meal and curbing crushing.
Concern about edible oils supplies mounted this week after the World Health Organization raised its global pandemic alert, saying the disease, which surfaced in Mexico, is not containable. The virus has been confirmed in at least seven nations.
July-delivery palm oil dropped as much as 1.8 percent to 2,413 ringgit ($670) a metric ton on the Malaysia Derivatives Exchange, and traded at 2,414 ringgit at the midday break in trading. Futures have gained 59 percent since October and averaged 2,021 ringgit since the year started.
“Oil palms are moving into the seasonally high production period,” Credit Suisse Group analysts Tan Ting Min in Kuala Lumpur and Teddy Oetomo in Jakarta, said. “News flow on the edible oils market may remain positive for a couple more months, but outlook is expected to turn bearish in the second half.”
Oil palms typically produce 55 percent of their annual output in the second half.
AMResearch Sdn. and Credit Suisse maintain their palm oil forecasts at 2,500 ringgit and 2,250 ringgit a ton respectively.
Soybean oil for July delivery gained for the first time in three days, rising as much as 0.8 percent to 35.46 cents a pound in after-hours trading in Asia. It’s trading at 35.37 cents on the Chicago Board of Trade at 12:25 p.m. Singapore time.
In China, the world’s largest consumer of pork and cooking oils, soybeans for January-delivery gained 0.7 percent to 3,309 yuan a ton. Soybean oil for September delivery added 0.4 percent to 6,718 yuan a ton and palm oil for September delivery fell 0.3 percent to 6,030 yuan a ton.
