Palm oil gained for the first time in six days as a slump to the lowest level in almost three years widened its discount to soybean oil, spurring demand from importers for food and fuel.
The December-delivery contract advanced as much as 4.5 percent to 2,357 ringgit ($770) a metric ton on the Malaysia Derivatives Exchange and was at 2,350 ringgit at 4:54 p.m. in Kuala Lumpur. Futures earlier fell to 2,230 ringgit, the lowest level for the most-active month since November 2009. Futures have slumped 23 percent since the end of August.
Palm oil has plunged as a global economic slowdown hurt demand for the oil used in everything from candy to biofuel amid a seasonal increase in production in Indonesia and Malaysia, the world’s largest producers. Stockpiles in Malaysia may have jumped to 2.6 million tons at the end of September, Ivy Ng, an analyst at CIMB Group Holdings Bhd., wrote in a report today.
“The selldown of crude palm oil may be overdone based on fundamentals, and the price decline should be sufficient to attract demand,” CIMB’s Ng said. “Palm oil is at an attractive discount to soybean oil and is increasingly attractive as a biodiesel feedstock.”
Soybean oil’s premium over the tropical oil reached $378.98 a ton yesterday, the most since September 2008. Soybean oil and palm oil are used in foods and fuels.
Soybean oil for December delivery dropped 1.1 percent to 50.16 cents a pound on the Chicago Board of Trade. Soybeans for November delivery lost 1.5 percent to $15.0825 a bushel.
Reserves in Malaysia may be at 2.43 million tons, Alan Lim Seong Chun, an analyst at Kenanga Investment Bank Bhd., wrote in a report today. Inventories reached an all-time high of 2.27 million tons in November 2008, according to the Malaysian Palm Oil Board. The board is scheduled to release data for last month on Oct. 10.
Indonesia’s exports may fall to 1.52 million tons this month from an estimated 1.63 million tons in September as buyers may hold orders because of falling prices, said Sahat Sinaga, executive director at the Indonesian Vegetable Oil Industry Association.
“Buyers may seek to renegotiate their long-term contracts,” Sinaga said. “It’s hard to take positions with such a drop in prices.”
Monthly palm oil output may remain high until early 2013, says Susanto, head of marketing at Indonesia Palm Oil Association. Production may exceed 25 million tons this year, he said. Prices are poised to fall further as stockpiles climb in Asia and exports remain weak, said Susanto.
First Resources Ltd. (FR) dropped as much as 7.3 percent to S$1.900 and Golden Agri-Resources Ltd. fell as much as 3.8 percent to S$0.630 in Singapore trading today, leading declines in Asian palm oil producers. Sime Darby Bhd., (SIME) the biggest listed palm oil producer, lost as much as 5.1 percent to 9.24 ringgit in Kuala Lumpur.
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