Palm Oil Slumps as Stockpiles in Malaysia Hold Near Record Level

Palm oil dropped the most in more than six weeks as reserves in Malaysia, the world’s second- largest producer, dropped less than expected last month from a record in December.

The contract for delivery in April fell 2.2 percent to close at 2,505 ringgit ($811) a metric ton on the Malaysia Derivatives Exchange, the lowest level for the most-active contract since Jan. 29, and the steepest drop since Dec. 31. Trade restarted today after a two-day break on Feb. 11 and 12 for the Lunar New Year.

Inventories fell 1.9 percent to 2.58 million tons last month from 2.63 million in December, the Malaysian Palm Oil Board said today. The drop in reserves was less than the median estimate of a decline to 2.53 million tons in a Bloomberg survey. Output fell 10 percent to 1.6 million tons, while exports slid 1.6 percent to 1.62 million tons, the board said.

“This will have a negative impact on prices because inventories are still high,” Prathamesh Mallya, an analyst at AnandRathi Commodities Ltd., said from Mumbai. Prices may continue to be pressured in the next two days “because inventories at such high levels will not be tolerated, unless and until we see demand pouring in from India.”

Soybean oil for March delivery dropped 0.8 percent to 50.71 cents a pound on the Chicago Board of Trade, heading for a seventh straight day of losses. Soybean oil, which is a substitute for palm oil in food and fuel uses, costs about 1.38 times the price of palm.

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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