Palm Oil Set for First Weekly Drop in Four on Inventories

Palm oil headed for the first weekly decline in four on speculation that stockpiles in Malaysia, the second-largest producer, may stay near a record as soybean harvests from South America increase global oilseed supplies.

The contract for delivery in April lost as much as 0.2 percent to 2,546 ringgit ($822) a metric ton on the Malaysia Derivatives Exchange, and ended the morning session at 2,552 ringgit in Kuala Lumpur. Futures are poised for a 0.2 percent drop this week, the first loss since the five days ended Jan. 11. Malaysia’s financial markets will be closed on Feb. 11 and 12 for the Lunar New Year festival.

Stockpiles in Malaysia probably fell 3.8 percent to 2.53 million tons in January from the all-time high of 2.63 million tons in December, according to a Bloomberg survey published Feb. 6. That’s still higher than the inventory levels of 2.02 million tons a year ago and 1.42 million tons in January 2011. The Malaysian Palm Oil Board is due to release the data on Feb. 13.

“Stock pressure will definitely be there unless new demand comes,” said Rajesh Modi, a trader at Sprint Exim Pte, said by phone from Singapore. Futures will be pressured by the increasing arrivals of soybeans from South America, he said.

Soybean oil’s premium over palm oil was at $322.34 a ton today, compared with this year’s high of $351.75 a ton on Jan. 28, data compiled by Bloomberg show. The oils are substitutes in food and fuel use.

Soybean output in Brazil, set to surpass the U.S. as the largest grower, will rise to a record 83.4 million tons in the 2012-2013 crop year, the Agriculture Ministry said yesterday. Argentina’s soybean crop for 2012-2013 may be 50 million tons, the Buenos Aires Grains Exchange said yesterday.

Soybeans for March delivery gained 0.3 percent $14.9075 a bushel on the Chicago Board of Trade, while soybean oil for March delivery rose 0.3 percent to 52.01 cents a pound. Soybean oil costs about 1.39 times the price of palm oil.

Refined palm oil for delivery in September was little changed at 7,126 yuan ($1,143) a ton on the Dalian Commodity Exchange. Soybean oil for delivery in the same month dropped 0.2 percent to 8,746 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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