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Palm Drops to Six-Week Low as Malaysian Inventories to Stay High

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Feb. 28 (Bloomberg) -- Palm oil fell for a seventh day, the worst run in more than two months, on speculation that stockpiles in Malaysia, the largest producer after Indonesia, will remain at high levels as exports decline.

The contract for May delivery dropped 0.6 percent to 2,396 ringgit ($775) a metric ton on the Malaysia Derivatives Exchange, the lowest price at close for the most-active contract since Jan. 17. The losing streak is the longest since Dec. 5, taking declines to 6.3 percent this month.

Shipments from Malaysia should be allowed duty-free for some companies until midyear to help reduce near-record stockpiles, Sabri Ahmad, chief executive officer of Felda Global Ventures Holdings Bhd., said in an interview yesterday. Inventories last month were at 2.58 million tons, holding near a record 2.63 million tons in December, according to the Malaysian Palm Oil Board. Exports declined 9.1 percent to 1.33 million tons in February from last month, surveyor Intertek said today. Shipments fell 8.8 percent to 1.3 million tons, Societe Generale de Surveillance said.

“The decline in exports has raised concerns that stockpiles in February will remain high,” said Paramalingam Supramaniam, director at Kuala Lumpur-based brokerage Pelindung Bestari Sdn. “The duty in March will deter demand.”

Exports of crude palm oil in March are set to be taxed at 4.5 percent after two months of duty-free shipments. To spur a drop in the stockpiles, Malaysia’s government replaced from Jan. 1 an export tariff of about 23 percent and an annual duty-free quota with a sliding-scale levy from 4.5 percent to 8.5 percent. With prices below the threshold that triggers the lowest rate, shipments in January and this month have been duty-free.

Soybean oil for May delivery lost 0.3 percent to 49.50 cents a pound on the Chicago Board of Trade. Soybeans for May delivery gained 0.4 percent to $14.4525 a bushel.

Refined palm oil for delivery in September declined 1.6 percent to end at 6,624 yuan ($1,065) a ton on the Dalian Commodity Exchange, the lowest price at close since Nov. 12. Soybean oil for delivery in the same month declined 0.4 percent to 8,288 yuan a ton, the lowest price at close for the most-active futures since September 2010.

To contact the reporter on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net

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

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