Palm Oil Drops as Weak Global Economy Fuels Demand Concerns

Palm oil declined on concerns that the weakness in the global economy may affect demand for vegetable oils and lower exports from Malaysia, the second largest producer.

The February-delivery contract dropped as much as 0.7 percent to 2,980 ringgit ($935) a metric ton on the Malaysia Derivatives Exchange and closed the morning session at 2,994 ringgit in Kuala Lumpur.

Asia’s stock markets declined after the U.S. Federal Reserve refrained from taking more steps to spur growth and U.S. retail sales gained at the slowest pace in five months. The Fed yesterday repeated a warning from its two previous meetings that “strains in global financial markets continue to pose significant downside risks to the economic outlook.”

“The underlying weakness in the global economy because of all the uncertainties have led to concerns that demand for vegetable oils may be affected,” Ivy Ng, an analyst at CIMB Group Holdings Bhd., said by phone from Kuala Lumpur. “The export data so far this month suggests a weak demand trend.”

Malaysia’s palm oil exports fell 4.6 percent to 436,633 tons in the first 10 days of December from the same period a month earlier, Societe Generale de Surveillance said yesterday. Shipments fell 5.1 percent to 443,699 tons, Intertek said Dec 12.

Malaysia’s palm oil inventories remained above the 2 million ton mark for the third month in November as exports shrank 9.9 percent to 1.7 million tons, the Malaysian Palm Oil Board said yesterday. Stockpiles declined 1.5 percent to 2.1 million tons. Output declined 14.8 percent to 1.6 million tons in November from a month earlier, it said.

January-delivery soybeans declined as much as 0.6 percent to $11.115 a bushel on the Chicago Board of Trade before trading at $11.14 at 12:28 p.m. in Singapore. Soybean oil for March delivery fell as much as 0.2 percent to 49.52 cents a pound.

Palm oil for delivery in May declined as much as 1.7 percent to 7,690 yuan ($1,207) per ton on the Dalian Commodity Exchange and soybean oil for September delivery climbed as much as 0.3 percent to 8,760 yuan.

To contact the reporter on this story: Swansy Afonso in Mumbai at safonso2@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.