Palm oil slumped the most in more than 14 months on concerns that an escalating debt crisis in Europe and a deepening economic slowdown in China may curb demand for commodities.
July-delivery palm oil lost 3.8 percent, the most for the most active contract since Feb. 23, 2011, to end at 3,150 ringgit ($1,022) a metric ton on the Malaysia Derivatives Exchange. That’s the lowest close since Feb. 10.
European officials began to weigh the fallout of a possible withdrawal of Greece from the euro area even as authorities in Athens struggled to form a government, strengthening the dollar as a haven. China on May 12 said it would cut the amount lenders must set aside as reserves for the third time since November, underscoring the government’s determination to aid economic growth that’s poised to slow for a sixth straight quarter.
“There is a widespread meltdown in commodities because of a strong dollar and palm has not been spared,” Ryan Long, vice president of futures and options at OSK Holdings Bhd., said by phone from Kuala Lumpur. “Exports from Malaysia in the first 10 days of May have also not been good.”
Shipments declined 6 percent to 450,269 tons from the same period a month earlier, Intertek said May 10. Exports fell 14 percent to 419,364 tons in the same period, Societe Generale de Surveillance estimated. The Standard & Poor’s GSCI Spot Index, a gauge of 24 commodities, dropped for a ninth day, falling as much as 1.8 percent to the lowest level since Dec. 20.
“Whenever there’s an economic slowdown, especially when we talk about China, we’re more concerned about whether the slowdown is going to dampen demand,” said Ker Chung Yang, an analyst at Phillip Futures Pte., Singapore.
A decline in soybeans on speculation that U.S. farmers will expand planting also weighed on palm oil, OSK’s Long said. The pace of soybean planting in the U.S. has been encouraging and the crop is expected to be higher, he said. Soybeans can be crushed to make soybean oil, which competes with palm oil for use in food and fuels.
Soybeans for July delivery fell 2 percent to $13.7775 a bushel on the Chicago Board of Trade. Soybean oil for delivery in the same month lost 2 percent to 51.21 cents a pound.
Palm oil for September delivery slid 1.8 percent to close at 8,286 yuan ($1,311) a ton on the Dalian Commodity Exchange, the lowest for the most-active contract since March 7. Soybean oil for the same month fell 1.8 percent to close at 9,390 yuan.