Palm Oil Drops as Record Global Soybean Output May Hurt Demand

Palm oil declined on concern that demand for supplies from Malaysia, the second-largest producer, will shrink as global production of soybeans climbs.

The contract for delivery in March fell 0.2 percent to 2,576 ringgit ($793) a metric ton on the Bursa Malaysia Derivatives. Futures have gained 5.7 percent this year.

Shipments from Malaysia fell 14 percent to 640,240 tons in the first 15 days of December from a month earlier, surveyor Intertek said yesterday. Global soybean production will reach a record 284.94 million tons in 2013-2014, up from 268.02 million tons a year earlier, the U.S. Department of Agriculture said Dec. 10. Soybeans are crushed to make soybean oil.

“Higher global soybean oil supplies are weighing on prices,” said Isha Trivedi, an analyst at PhillipCapital India Pvt., in Mumbai. “The narrowing price gap between soybean oil and palm oil has raised concerns over a shift in demand.”

Palm oil’s discount to soybean oil narrowed to $92.67 a ton today from $297.44 at the start of the year, according to data compiled by Bloomberg.

Soybean oil for March delivery rose 0.2 percent to 40.17 cents a pound on the Chicago Board of Trade. Soybeans declined 0.6 percent to $13.175 a bushel.

Refined palm oil for May delivery climbed 0.7 percent to end at 6,076 yuan ($1,001) a ton on the Dalian Commodity Exchange. Soybean oil rose 0.2 percent to close at 7,022 yuan.

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