Palm Oil Tumbles Most in Three Months on Soybean Crop Forecast

Palm oil fell the most since November as forecast for a record U.S. soybean crop next year deepened concern that global cooking oil supplies may increase and a tax on exports will curb demand for Malaysian supplies.

The contract for delivery in May dropped as much as 2.8 percent to 2,463 ringgit ($794) a metric ton on the Malaysia Derivatives Exchange, the biggest drop for the most-active contract since Nov. 12, and ended the morning session at 2,479 ringgit in Kuala Lumpur. Futures gained 2.1 percent last week.

Farmers in the U.S. will expand soybeans sowing, taking the next harvest to an all-time high of 3.4 billion bushels, and doubling inventories by Aug. 31, 2014 to 250 million bushels, the U.S. Department of Agriculture said Feb. 22. Soybean oil futures fell for a third day to the lowest level since Jan. 15 in Chicago today. Wheat and corn also fell.

“Palm oil prices fell in line with soybean oil, not just due to fundamental factors but also because of a stronger dollar and fund selling across the grains markets,” said Chandran Sinnasamy, head of trading at LT International Futures Sdn. in Kuala Lumpur. “Palm oil exports may be lower until the first half of March at least because of the increase in tax.”

Shipments from Malaysia, the second-largest producer, climbed 4.6 percent to 1.15 million tons in the first 25 days of February from a month earlier, independent surveyor Intertek said today. The gain was smaller than the 18 percent increase in the first 15 days of the month, data showed.

Export Taxes

Crude palm exports from Malaysia will be taxed at 4.5 percent in March after shipments were allowed at zero duty in the previous two months. Indonesia, biggest producer, also raised the export tax for March to 10.5 percent from 9 percent this month, the nation’s trade ministry said on Feb. 22.

Soybean oil for May delivery fell as much as 0.7 percent to 50.38 cents a pound on the Chicago Board of Trade. The cooking oil’s premium to palm oil was at $315 a ton today. The two are the most consumed edible oils in the world. Soybeans for May delivery was little changed at $14.43 a bushel.

Refined palm oil for delivery in September slid 3.6 percent to 6,812 yuan ($1,092) a ton on the Dalian Commodity Exchange. Soybean oil for delivery in the same month fell 3.1 percent to 8,430 yuan a ton.

To contact the reporter on this story: Swansy Afonso in Mumbai at safonso2@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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