Palm Oil Drops After Rally to One-Year High Deemed Excessive

Palm oil fell for the first time in four days as some investors deemed a rally to the highest level in more than a year as excessive.

The June-delivery contract declined 0.2 percent to close at 3,473 ringgit ($1,134) a metric ton on the Malaysia Derivatives Exchange. Futures reached 3,497 ringgit in intraday trading yesterday, the highest level since March 10, 2011. The commodity has rallied 9.4 percent this quarter.

“Profit-taking at higher levels pulled down palm oil prices,” Shikha Mittal, an analyst at Karvy Comtrade Ltd., said by phone from the Indian city of Hyderabad. Concerns that palm oil production may decline and damages to soybean crops in South America helped limit losses, she said.

Palm oil production growth in the first half will slow from the same period in 2011 while the drought in South America will curb supplies of soybeans, boosting prices, Dorab Mistry, director at Godrej International Ltd., said yesterday. Production will increase by 2 million tons this year compared with 5.5 million tons in 2011, said Mistry, who’s traded the tropical oil for more than three decades.

Soybeans can be crushed to make soybean oil, which competes with palm oil for use in food and fuel.

Soybeans for May delivery gained 0.4 percent to $13.7575 a bushel on the Chicago Board of Trade. Soybean oil for the same month advanced 0.2 percent to 55.22 cents a pound.

Palm oil for delivery in September declined 0.3 percent to close at 8,716 yuan ($1,384) a ton on the Dalian Commodity Exchange. Soybean oil for delivery in the same month dropped 0.3 percent to 9,702 yuan a ton.

To contact the reporter on this story: Supunnabul Suwannakij in Bangkok at ssuwannakij@bloomberg.net

To contact the editor responsible for this story: Jake Lloyd-Smith at jlloydsmith@bloomberg.net

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