Palm oil dropped on speculation that a government report due for release tomorrow that includes stockpiles in Malaysia, the second-largest producer, may not show as big a decline in reserves last month as forecast.
The April-delivery contract fell 0.2 percent to close at 3,148 ringgit ($1,047) a metric ton on the Malaysia Derivatives Exchange. The edible oil, 0.9 percent lower this year, rallied 2.3 percent yesterday amid speculation that the reserves are set to decline.
“A bearish report would open the floodgates for a massive profit take,” said Paramalingam Subramaniam, director of brokerage Pelindung Bestari Sdn., referring to the Malaysian Palm Oil Board report, which also has output and export data.
Futures advanced yesterday after a Bloomberg survey showed that January inventories probably fell to a five-month low. Stockpiles (PASTTOTL) lost 2.4 percent to 1.99 million tons, dropping below the 2 million-mark for the first time since August, according to the survey of three analysts and two plantation companies.
“Palm oil is correcting, consolidating from yesterday’s sharp rise,” said Chandran Sinnasamy, trading head at Kuala Lumpur-based LT International Futures (M) Sdn. Chandran expects stockpiles to be 2.05 million tons, as exports continue to slow.
Output (PALPCPO) may have dropped 13 percent to 1.3 million tons, the lowest level since February last year, while exports lost 15 percent to 1.35 million tons, the biggest decline since August 2010, the survey also showed.
Investors “are keeping an eye on the February crop production as well as the supply-and-demand reports,” Gnanasekar Thiagarajan, a director at Commtrendz Risk Management Services Pvt., said in a report, referring to the global crop estimates that are to be released by the U.S. Department of Agriculture at 8:30 a.m. in Washington today. The U.S. outlook will cover soybeans, which are crushed to make a rival oil.
Malaysian palm oil exports to Iran have suffered as a result of U.S. sanctions on the Middle East nation, International Trade and Industry Minister Mustapa Mohamed told reporters in Kuala Lumpur today.
Soybeans for March delivery were little changed at $12.305 a bushel on the Chicago Board of Trade at 6:09 p.m. Soybean oil, a substitute for palm oil in food and fuel, traded little changed at 52.60 cents per pound.
Palm oil for September delivery gained 0.2 percent to close at 8,246 yuan ($1,310) a ton on the Dalian Commodity Exchange. Soybean oil for September declined 0.2 percent to end at 9,286 yuan a ton.
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