Palm Oil Futures Drop for Fourth Day as Production Seen Higher

Palm oil fell for a fourth day on concerns that global production may increase this month and a rally in the ringgit to the highest since August 2011 may reduce the appeal of commodities priced in the Malaysian currency.

The contract for July delivery fell as much as 0.7 percent to 2,235 ringgit ($750) a metric ton on the Bursa Malaysia Derivatives, before trading at 2,246 ringgit at 3:52 p.m. in Kuala Lumpur. Futures, which lost 7.9 percent this year, reached 2,230 ringgit yesterday, the lowest since on Dec. 13.

Output from Malaysia, the world’s second-largest producer, gained 5.3 percent to 1.4 million tons in April, while exports fell 6.5 percent to 1.44 million tons, a Bloomberg survey published yesterday showed. Reserves decreased 5.1 percent to 2.06 million tons, the least since July, according to the survey. Official data are due for release on May 10.

“People are looking at the current month’s production which is anticipated to be about 8 percent to 10 percent higher in Malaysia, and Indonesia is also expected to record higher output after a few months of lower production,” said Chandran Sinnasamy, head of trading at LT International Futures Sdn. “That will apply pressure. There’s no robust demand at the moment to support prices.”

Production in Indonesia, the largest supplier, may reach 28 million tons this year from 25.7 million tons in 2012, Derom Bangun, chairman of the country’s palm oil board, said today. That was lower than a February forecast of 30 million tons.

The rally in the ringgit also weighed on futures, Chandran said. The ringgit strengthened after Malaysian Prime Minister Najib Razak’s coalition retained power in the weekend poll, bolstering the outlook for economic reforms.

Soybeans for July delivery gained 0.5 percent to $13.7575 a bushel on the Chicago Board of Trade. Soybean oil climbed 0.6 percent to 49.06 cents a pound.

Refined palm oil for September delivery declined 0.7 percent to close at 5,904 yuan ($960) a ton on the Dalian Commodity Exchange. Soybean oil for same month delivery retreated 0.2 percent to end at 7,362 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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