Palm Oil Drops to Three-Month Low as Europe Crisis to Cut Demand

April 1 (Bloomberg) --Palm oil tumbled to the lowest level this year on concern that exports from Malaysia, the second-biggest producer after Indonesia, may decline as Europe’s debt crisis and a slowing Chinese economy curb demand.

The contract for delivery in June dropped 1.8 percent to 2,336 ringgit ($755) a metric ton on the Malaysia Derivatives Exchange, the lowest price at close for the most-active contract since Dec. 20. Prices fell 2.5 percent in the first quarter, the fourth quarterly loss in the worst streak since 1999.

“European debt crisis and China economy will remain the key to palm oil price outlook,” Phillip Futures Pte. said in a report today. “There are concerns that property and investment curbs in China might slow the economy more than necessary and damp the demand outlook for palm oil.”

Europe’s economy will contract for a second straight year in 2013, according to the median of analysts’ forecasts compiled by Bloomberg. China’s largest cities, including Beijing and Shanghai, tightened rules on home purchases after the nation asked local governments to step up efforts to cool the property market. Europe is the largest buyer of palm after India and China, the U.S. Department of Agriculture data shows.

Inventories in China, which reached a record at the start of March, fell 60,000 tons last week to 1.19 million tons, Grain.gov.cn, a state-owned researcher, said in an e-mailed report. Exports from Malaysia rose 2.8 percent to 1.36 million tons in March from a month ago, surveyor Intertek said today. Shipments rose 5.5 percent to 1.37 million tons, Societe Generale de Surveillance said.

Soybean oil for May delivery dropped 1.3 percent to 49.44 cents a pound on the Chicago Board of Trade, while soybeans for May fell 1.2 percent to $13.88 a bushel.

Refined palm oil for September delivery fell 2 percent to close at 6,120 yuan ($986) a ton on the Dalian Commodity Exchange. Soybean oil for delivery in the same month retreated 1.6 percent to at 7,808 yuan a ton.

To contact the reporter on this story: Swansy Afonso in Mumbai at safonso2@bloomberg.net

To contact the editor responsible for this story: Jake Lloyd-Smith at jlloydsmith@bloomberg.net