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Palm Oil Set for Biggest Weekly Loss in 10 Months on Soybeans

Aug. 20 (Bloomberg) -- Palm oil futures had their biggest weekly decline in more than 10 months after rival soybean oil tumbled on expectation of a bigger U.S. crop and Asian importers slowed purchases.

November-delivery contract fell 2 percent to 2,544 ringgit ($810) a metric ton on the Malaysia Derivatives Exchange, the lowest price since July 30. The commodity slumped 6.4 percent this week, the most since the week ended Oct. 2.

“All the concerns about La Nina weather affecting the U.S. soybean crop haven’t materialized,” said Ben Santoso, an analyst at DBS Vickers (Singapore) Pte. in Singapore. “I don’t anticipate any major damage to the soybean crop and that may bring prices further down.”

The oilseed fell to the lowest level in two weeks yesterday after analysts touring the main growing areas in the U.S., the world’s top exporter, said the crops may be bigger than a year earlier. November-delivery futures fell 1.8 percent to close at $10.1225 a bushel on the Chicago Board of Trade yesterday. The oilseed lost 0.8 percent to $10.04 at 6:30 p.m. in Singapore, set for its first weekly decline in four weeks.

December-delivery soybean oil tumbled 2.3 percent to 40.48 cents a pound yesterday, the lowest since July 30. The drop has narrowed the vegetable oil’s premium over palm oil to $62.7 a ton, the lowest since May 18, Bloomberg data show. Soybean oil futures lost 0.8 percent to 40.14 cents today.

“There will be a significant shift towards soybean oils in the near future because of abundant supply,” said Santoso. “Since palm oil has traditionally traded at a discount to soybean oil, palm oil will also decline.”

Economic Growth

The Malaysian ringgit climbed to a 13-year high yesterday after the central bank eased currency curbs and reported better-than-expected economic growth, raising costs for palm oil buyers.

The nation’s palm oil exports fell 3.8 percent to 837,526 tons in the first 20 days of August from July, surveyor Societe Generale de Surveillance said today. Shipments fell 1.8 percent to 863,289 tons from 879,018 tons in the same period in July, rival Intertek said.

Sales to China, Pakistan and the U.S. fell, while those to the European Union climbed, SGS data showed.

“Exports have disappointed and the strong gains in ringgit is a big negative for the market,” said Ryan Long, a dealer at OSK Investment Bank Bhd.

China has more than 8 million tons of vegetable oil in reserves, the highest level on record, the state-controlled China National Grain & Oils Information Center said in an e-mailed daily report. Cooking oil held by the central and local governments are also at the highest levels ever, the report said. The center is owned by State Administration of Grain.

Indonesia Tax

Indonesia may double the tax on crude palm oil exports next month to 6 percent after prices increased, Steaven Halim, second secretary at the Indonesian Palm Oil Association, said in an e-mailed response to Bloomberg News. The nation may boost exports ahead of the tax increase, and ease them in September after it takes effect, he said.

Palm oil may get support from “tight” output in August and September in Indonesia and Malaysia, the largest producers, DBS’ Santoso said. Futures will average 2,363 ringgit a ton in the six months ending December, he said.

CME Group Inc.’s December-delivery palm oil contract, which is pegged to the Malaysian benchmark price, fell as much as 1.3 percent to $804.75 a ton.

On the Dalian Commodity Exchange, palm oil for delivery in January lost 3.2 percent to 6,958 yuan ($1,025) a ton, the most since Jan. 13, while May-delivery soybean oil lost 2.7 percent to 7,958 yuan, the most in more than seven months.

To contact the reporter on this story: Thomas Kutty Abraham in Mumbai at tabraham4@bloomberg.net

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

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