Palm Oil Declines as Rally to Six-Week High May Hurt Demand

Palm oil dropped on concern that a rally to the highest level in six weeks may crimp demand, and as speculation intensified that there may not be further stimulus from the U.S., hurting commodities.

The November-delivery contract fell as much as 1.2 percent to end the morning session at 3,055 ringgit ($978) a metric ton on the Malaysia Derivatives Exchange. Futures gained to 3,091 ringgit yesterday, the highest settlement for the most-active contract since July 16, as the worst U.S. drought in a generation drove soybeans to a record.

“On the macro-economic front, it’s about the stimulus package,” Ker Chung Yang, an analyst at Phillip Futures Pte, said by phone from Singapore. Investors had “probably priced in the worst-case scenario” for the U.S. soybean crop, he said.

Federal Reserve Chairman Ben S. Bernanke probably won’t use an Aug. 31 speech at the Fed’s annual symposium in Jackson Hole, Wyoming, to suggest a third round of bond buying is imminent, according to JPMorgan Chase & Co. and High Frequency Economics. Members of the Federal Open Market Committee have been divided about whether to spur expansion.

Exports from Malaysia, the second-largest producer, rose 6.6 percent to 1.05 million tons in the first 25 days of August compared with 986,829 tons in the same period the previous month, surveyor Societe Generale de Surveillance said yesterday.

November-delivery soybeans rose as much as 0.7 percent to $17.31 a bushel on the Chicago Board of Trade and traded at $17.2375. Soybeans surged to a record $17.605 yesterday. Soybean oil for December delivery was little changed at 56.6 cents a pound. Palm oil and soybean oil are used in foods and fuels.

Palm oil for January delivery lost 0.9 percent to 8,206 yuan ($1,290) a ton on the Dalian Commodity Exchange. Soybean oil for delivery in the same month retreated 1.2 percent to 10,012 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: James Poole at jpoole4@bloomberg.net

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