Palm Oil Posts First Weekly Decline in Five as Supply Expands

Palm oil capped the first weekly decline in five on speculation that increasing output in top growers Indonesia and Malaysia will boost stockpiles.

Palm for November delivery closed little changed at 2,347 ringgit ($713) a metric ton on the Bursa Malaysia Derivatives. Futures dropped 4 percent this week, the most since the five days ended March 29. Palm for physical delivery in September was at 2,370 ringgit, data compiled by Bloomberg show.

Prices may extend their decline as supplies of the most-used cooking oil climb and biodiesel demand peaks, according to Dorab Mistry, director at Godrej International Ltd. Palm, used in everything from candy to biofuel, is produced year-round with supply accelerating in the second half because of growing cycles.

“These are typically the higher production months, so the question is whether exports can keep up the pace so that inventories will remain in check,” said James Ratnam, an analyst at TA Securities Holdings Bhd. in Kuala Lumpur.

Output in Malaysia gained 3.6 percent to 1.74 million tons in August from July, the highest level since December, while exports climbed 7.4 percent to 1.52 million tons, according to the Malaysian Palm Oil Board. In Indonesia, production rose 0.8 percent to 2.4 million tons in July, also the highest since December, according to estimates compiled by Bloomberg.

Inventories in Malaysia were 1.67 million tons in August, little changed from July, board data shows. Indonesian reserves were estimated at 2.35 million tons in July.

Soybeans for November gained 0.2 percent to $13.9875 a bushel on the Chicago Board of Trade. Soybean oil for December delivery fell 0.4 percent to 42.88 cents a pound.

Refined palm oil for January delivery declined 0.5 percent to close at 5,470 yuan ($894) a ton on the Dalian Commodity Exchange. Soybean oil ended little changed at 7,196 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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