Palm, the world’s most consumed cooking oil, tumbled to the lowest level in more than three years amid record inventories in Malaysia and on signs that global supplies will be more than enough to meet demand.
Futures fell as much as 1.1 percent to 2,217 ringgit ($727) a metric ton on the Malaysia Derivatives Exchange, the lowest price since November 2009, and settled at 2,230 ringgit in Kuala Lumpur. Prices are heading for a 30 percent decline this year, the worst annual loss since the 2008 financial crisis.
Palm, used in everything from Nestle SA’s Maggi instant noodles to Unilever’s soap bars, has plunged as output in Indonesia and Malaysia, the biggest producers, outpaced demand from China and India. Prices have declined even as soybeans jumped 22 percent this year and wheat advanced 25 percent. Futures will probably drop into a bear market next year, said Dorab Mistry, director at Godrej International Ltd.
“The stocks are still high and they have to keep prices low to get rid of them,” said Ivy Ng, an analyst at CIMB Group Holdings Bhd. in Kuala Lumpur. “Most people will just buy hand-to-mouth. I would expect exports to be better in January.”
Global inventories of soybean oil, an alternative, will reach 3 million tons in the year that began Oct. 1, up from 2.9 million tons forecast a month ago, the U.S. Department of Agriculture said Dec. 11. Palm oil stockpiles in Malaysia reached an all-time high of 2.56 million tons in November, according to the nation’s palm oil board.
The S&P GSCI Agriculture Index of eight commodities has gained 6.9 percent this year, while soybean oil lost 5.4 percent. Futures in Malaysia will trade between 2,300 ringgit and 2,600 ringgit a ton between now and February, and drop below 2,200 ringgit in August or earlier to clear inventories, Godrej’s Mistry said Nov. 30.
Malaysian shipments may slow this month as exporters await a new tax structure from Jan. 1, CIMB’s Ng said. The new system will help create more demand, Bernard Dompok, Malaysia’s Plantation Industries and Commodities Minister, said yesterday.
Tax on crude palm oil exports may be zero next month, Maybank Investment Bank Bhd. said on Dec. 11. The average free-on-board price between Nov. 10 and Dec. 9 that will be taken to set the January levy is estimated to be below the minimum threshold of 2,250 ringgit for the tax to apply, analysts Ong Chee Ting and Chai Li Shin said in a report.