Palm Drops for Third Day on Record Production, Stronger Ringgit

Palm oil fell for a third day after Malaysia, the second-largest producer, estimated its output would reach a record and the country’s currency rose to a four-month high, reducing the appeal of ringgit-denominated futures.

The contract for delivery in January slid as much as 0.7 percent to 2,426 ringgit ($774) a metric ton on the Bursa Malaysia Derivatives, and was at 2,438 ringgit at the midday break in Kuala Lumpur. Palm for physical delivery in November was at 2,450 ringgit, data compiled by Bloomberg show.

Production will probably expand 3.3 percent to 19.4 million tons this year as yields increase, more trees begin production and oil extraction rates improve, Malaysia’s finance ministry said Oct. 25 in its Economic Report for 2013-2014. The ringgit was at the strongest level against the dollar since June, after the government laid out plans to cut the fiscal deficit in the 2014 budget announced Oct. 25.

“When the ringgit is higher, palm becomes expensive for importers like India and China,” said Prathamesh Mallya, an analyst at AnandRathi Commodities Ltd. Weather conditions indicate that the government’s production forecast is achievable and that would be “bearish for prices,” he said by phone from Mumbai. India and China are the world’s largest consumers.

Refined palm oil for May delivery was little changed at 6,078 yuan ($999) a ton on the Dalian Commodity Exchange and soybean oil was also little changed at 7,130 yuan.

Soybeans for delivery in January fell 0.4 percent to $12.8825 a bushel on the Chicago Board of Trade, while soybean oil for December gained 0.3 percent to 40.85 cents a pound.

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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