Palm Oil Drops as Falling Malaysian Exports Signal Weak Demand

Palm oil retreated on concern that stockpiles in Malaysia, the world’s second-largest producer, may remain near record levels as exports decline.

The contract for March delivery, the most-active by volume, fell as much as 0.6 percent to 2,336 ringgit ($767) a metric ton on the Malaysia Derivatives Exchange and ended the morning session at 2,341 ringgit. Futures are heading for a 26 percent drop this year, the worst annual loss since the financial crisis in 2008.

Stockpiles in Malaysia climbed to an all-time high of 2.56 million tons in November, the nation’s palm oil board said Dec. 10. The country will allow duty-free exports of crude palm oil in January after fixing the average price for calculating the tax at 2,147.81 ringgit a ton, below the minimum threshold of 2,250 ringgit. Shipments fell 3.3 percent to 734,571 tons in the first 15 days of December from a month earlier, Societe General de Surveillance said yesterday.

“The market has been range-bound, pressured by high stockpiles,” Vijay Mehta, a director at Commodity Links Pte., said by phone from Singapore. “All destinations are not buying at the moment. December and January are lean demand periods, but the palm-soybean oil differential will ensure some demand.”

Inventories in China, biggest buyer after India, totaled 890,000 tons last weekend and may reach a record of 1 million tons, said today. Large domestic stockpiles may be difficult to digest with no improvement in demand, it said.

Soybean oil for delivery in March gained 0.3 percent to 50.37 cents a pound on the Chicago Board of Trade, making it $344.66 a ton more expensive than palm oil. Palm and soybean oils are both used in food and fuel.

Palm oil for May delivery rose 0.2 percent to 6,842 yuan ($1,098) a ton on the Dalian Commodity Exchange. Soybean oil for May gained 0.2 percent to 8,806 yuan a ton.

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