Palm Oil Drops to One-Week Low as Inventories Seen Near Record

Palm oil declined to a one-week low on concern that inventories in Malaysia, the biggest supplier after Indonesia, will stay near a record even as production decreases because of the low-output season.

The contract for delivery in April ended at 2,547 ringgit ($822) a metric ton on the Malaysia Derivatives Exchange, the lowest price at close for the most-active contract since Jan. 30. Futures have gained 4.5 percent this year.

Inventories of the oil used in food and biofuels fell 3.8 percent to 2.53 million tons in January from the record a month earlier, according to the median of estimates from four analysts and two plantation companies in a Bloomberg survey published today. Production slumped 15 percent, the most since December 2010, to 1.51 million tons, while exports dropped 7.9 percent to 1.52 million tons, the median of five estimates shows. The Malaysian Palm Oil Board is due to release the data on Feb. 13.

Reserves at these levels are still high, said Chandran Sinnasamy, head of trading at LT International Futures Sdn. in Kuala Lumpur, referring to the survey figure. Output is typically lowest in January and February each year.

The median estimate for output in the survey was 17 percent higher than 1.29 million tons produced in January 2012, board data show. That should keep the inventory above 2 million tons throughout the first quarter, Alan Lim Seong Chun, an analyst at Kenanga Investment Bank Bhd., wrote in a report yesterday.

Malaysia will allow crude palm oil exports at zero duty for a third month in March if prices remain below a threshold of 2,250 ringgit a ton, Plantation Industries and Commodities Minister Bernard Dompok said Feb. 4. The country set the tariff at zero in January and extended it to February to clear the reserves.

Soybeans for March delivery declined 0.7 percent $14.845 a bushel on the Chicago Board of Trade, while soybean oil for March delivery lost 0.8 percent to 52.54 cents a pound.

Refined palm oil for delivery in September declined 0.3 percent to close at 7,136 yuan ($1,145) a ton on the Dalian Commodity Exchange. Soybean oil for delivery in the same month ended little changed at 8,810 yuan a ton.

Before it's here, it's on the Bloomberg Terminal.