Palm oil had its biggest daily plunge since October 2008 and fell to the lowest level in almost three years on concern slowing demand will cut shipments from the biggest producers, swelling a glut as output expands.
The December-delivery contract lost 8.5 percent to 2,255 ringgit ($739) a metric ton, the lowest close for the most-active month on the Malaysia Derivatives Exchange since November 2009. Futures have plunged 25 percent in five weeks.
Stockpiles in Malaysia will increase in October, November and December and may reach a record 3 million tons by January, Dorab Mistry, director at Godrej International Ltd., said Sept. 23. Production peaks between July and October. Industry estimates for the southern region of Peninsular Malaysia showed output grew more than 26 percent in September, said Paramalingam Supramaniam, a director at Pelindung Bestari Sdn.
“These figures were widely unpopular and paved the way for large liquidation at the close,” said Paramalingam. “Production pressure coupled with soybeans tumbling to the lowest level since July prompted an outburst of fresh selling by speculators.”
The southern states of Johor, Negeri Sembilan and Malacca accounted for about 20 percent of crude palm-oil output in 2011, according to the Malaysian Palm Oil Board.
The 14-day relative strength index was at 15.9 today and has stayed below 30 since Sept. 25. A reading below 30 is seen by some investors and traders as an indicator that the commodity is oversold and poised to rise.
Futures have plunged 38 percent from a 13-month high in April as a global economic slowdown hurts demand for the oil used in everything from candy to biofuel. Exports from Indonesia, the top producer, declined 6.6 percent in August to the lowest in two months as sales to China and the European Union fell, said the Indonesian Palm Oil Association. In Malaysia, the second-largest supplier, shipments fell 0.7 percent to 1.44 million tons in September, Intertek said.
“Slowing demand is probably more worrying and you’ve got rising stockpiles as well,” Carey Wong, an analyst at OCBC Investment Research Pte., said by phone from Singapore today. “Nobody is immune to the economic slowdown.”
Soybean oil for December delivery dropped 1.5 percent to 50.44 cents a pound on the Chicago Board of Trade. That takes soybean oil’s premium to palm to $373.46 a ton, the biggest since October 2008. The gap has widened almost sixfold since the beginning of May. Soybeans for November delivery lost 1.3 percent to $15.4025 a bushel, the lowest level for the most active contract since July.