Palm Swings as Drop in China Holdings Counters Malaysia Concern

Palm oil swung between gains and losses as speculation that stockpiles in Malaysia may rebound from this month was countered by data that showed inventory in China extended a decline.

The contract for September delivery traded 0.2 percent lower at 2,380 ringgit ($742) a metric ton on the Bursa Malaysia Derivatives at 5:10 p.m. in Kuala Lumpur after gaining and losing as much as 0.4 percent. Palm for local physical delivery in July was at 2,390 ringgit, data compiled by Bloomberg show.

Inventory at China’s major ports totaled 1.15 million tons, 20,000 tons less than a week ago, according to a report from state-owned researcher Grain.gov.cn, which said demand for palm may rise as it’s cheaper than other oils. Production in Malaysia typically increases from July to October each year, risking an increase in reserves.

“From July onwards, stocks may start to build up,” said Rajesh Modi, a trader at Sprint Exim Pte., referring to holdings in Malaysia, the second-largest producer. “I’m not seeing any aggressive demand coming in.”

Reserves in Malaysia fell 3.7 percent to 1.75 million tons in June from a month earlier, the least since June 2012, a Bloomberg survey last week showed. Output rose 6.2 percent to 1.47 million tons and exports gained 4.1 percent to 1.47 million tons, according to the survey. Data from the Malaysian Palm Oil Board are scheduled for release on July 10.

Soybean oil for December delivery lost 0.5 percent to 45.79 cents, while soybeans for delivery in November gained 0.5 percent to $12.345 a bushel in Chicago. Palm’s discount to soy was at $267.22 a ton today after dropping to $253.44 a ton on June 27, the smallest since August.

Refined palm oil for January delivery fell 0.7 percent to close at 5,850 yuan ($954) a ton on the Dalian Commodity Exchange, while soybean oil for delivery in the same month lost 1.1 percent to end at 7,238 yuan.

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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