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Palm Oil Drops From Two-Month High as Gains Seen Cutting Demand

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Jan. 3 (Bloomberg) -- Palm oil declined on concern that an advance to the highest level in two months yesterday may further reduce demand, which usually decreases during winter.

The contract for March delivery lost 1 percent to close at 2,475 ringgit ($816) a metric ton on the Malaysia Derivatives Exchange. Futures gained 2.6 percent yesterday to close at 2,501 ringgit, the highest settlement price for the most-active contract since Nov. 1.

Exports fell 5.7 percent to 1.57 million tons in December from 1.66 million tons a month earlier, surveyor Intertek said Dec. 31. Shipments dropped 7.9 percent to 1.52 million tons in the same period, estimated Societe Generale de Surveillance. Exports are generally lower during the winter months as the tropical oil clouds in cooler temperatures.

The winter is “the main reason that exports are not able to pick up,” Vijay Mehta, a director at Commodity Links Pte, said by phone from Singapore. “There should be a revival in demand from February onwards.”

Gains will be curbed on concerns about stockpiles in Malaysia, said Mehta. Futures lost 23 percent last year as inventories gained for five straight months, reaching a record 2.56 million tons in November, according to the Malaysian Palm Oil Board. Malaysia is the largest producer after Indonesia.

Soybeans for March delivery dropped as much as 0.7 percent to $13.8225 a bushel on the Chicago Board of Trade, the lowest price for the most-active contract since Nov. 20. Soybean oil for delivery in March declined 0.2 percent to 50.96 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: Jake Lloyd-Smith at jlloydsmith@bloomberg.net

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