Palm Oil Futures Drop From a One-Month High as Soybeans Fall

Palm oil dropped after a rally to the highest level in more than a month prompted some investors to lock in gains, and as soybeans, crushed to make a competing cooking oil, declined.

The March-delivery contract fell 0.9 percent to close at 3,155 ringgit ($992) per metric ton on the Malaysia Derivatives Exchange. Futures rose to 3,185 ringgit yesterday, the highest price at close since Nov. 21. The edible oil has plunged 17 percent this year, heading for the first annual loss since 2008.

Heavy rains in Malaysia, the second-biggest grower, have pushed prices up 4.5 percent this month on concerns that flooding may disrupt harvesting during the seasonally low output period. Production (PALPCPO) typically peaks between July and October before tapering off with the lowest output usually in January and February.

There may be some profit-taking after the steep rise yesterday, Ben Santoso, a plantation analyst at DBS Vickers Securities, said by phone from Singapore. “It will still continue on a rising trend towards the first quarter.”

Prices may trade between 3,000 ringgit and 3,350 ringgit in the first quarter of 2012, depending on the severity of floods, which for the time being seem to be hitting more populated areas, instead of plantations, Santoso said.

“Everybody is still on a wait-and-see attitude in terms of how bad the flooding would be,” he said.

Rain

Intermittent to occasionally moderate rains may continue until tomorrow in the state of Johor, which could cause floods in low-lying areas, the Malaysian Meteorological Department said on its website. Johor represents about 14.5 percent of planted area, making it the nation’s third-largest grower, according to data from the Malaysian Palm Oil Board.

Palm oil was also tracking the decline in soybeans, Santoso said. March-delivery soybeans fell 0.8 percent to $11.9825 a bushel on the Chicago Board of Trade. Futures reached $12.19 yesterday, the highest since Nov. 7.

South American corn and soybean crops face increasing damage in the next five to 10 days should forecasts for mostly dry weather eventuate, industry researcher Oil World said yesterday. Damage so far has been mainly to corn, and stress on soybeans will increase in coming days if the necessary moisture doesn’t arrive, it said.

Palm oil for delivery in May dropped 0.3 percent to close at 7,966 yuan ($1,261) per ton on the Dalian Commodity Exchange and soybean oil for September delivery ended little changed at 8,968 yuan a ton.

To contact the reporter on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net

To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net

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