Palm Oil Drops For 3rd Day As Stockpiles Climb

Palm oil declined for a third day yesterday, erasing earlier gains, after Malaysian stockpiles climbed to the second-highest on record last month.

Stockpiles climbed 16 per cent in December to 2.24 million metric tons, the country’s palm oil board said. The record was 2.27 million tons in November 2008. Malaysia is the world’s second-largest producer.

“Those are bearish numbers,” Ryan Long, a futures trader at OSK Investment Bank Bhd. said by email. “Stocks are much higher than general market expectation of 2.1 million.”

March-delivery palm oil fell as much as 2.1 per cent to RM2,572
a ton on the Malaysia Derivatives Exchange after the December production, export and stockpiles numbers were announced during the midday break. The contract declined 1.6 per cent to RM2,585
when trading ended at 6 pm.

Output last month dropped 4.7 per cent to 1.52 million tons from November and exports slumped 20 per cent to 1.21 million tons, the board said, adding that November data was revised.

For the full year, output surged 16 per cent to a record 20.5 million tons in 2009, taking into account the revised data. Exports rose to 15.84 million tons from 15.4 million in 2008.

Export continued to fall in the first 10 days of January, according to independent estimates by two cargo surveyors.

Shipments declined 15 per cent to 351,818 tons from the same period a month ago, Intertek said today. The drop was 13 per cent to 346,462 tons, Societe Generale de Surveillance, said.

The drop in palm oil price was limited as a weaker dollar lifted the appeal of crude oil, soybeans and other commodities as alternative investments.

“The basic expectation is that as long as interest rates are held low, the dollar is more likely to weaken than strengthen and the more support will be given to dollar- denominated commodities,” Scott Briggs, an agricultural commodities analyst at Australia & New Zealand Banking Group Ltd. said in a report yesterday.

The dollar index, a measure of the world’s reserve currency to six major currencies, declined as much as 0.7 per cent to 76.92, the lowest since December 17, according to Bloomberg data.

Crude oil gained as much as 1.1 per cent to US$83.67 a barrel on speculation increasing demand and supply constraints will cut global stockpiles and support prices. Oil was at US$83.62 at 5.17 pm Singapore time.

March-delivery soybeans in Chicago climbed as much as 1.1 per cent to US$10.3275 a bushel in Asian trade, trading at US$10.2625 a bushel at 5.15 pm Singapore time.

In Dalian, soybeans for September delivery rose 1.3 per cent to 4,031 yuan a ton. Dalian soybean oil added 0.8 per cent to 7,802 a ton. Palm oil rose 1.3 per cent to 7,124 yuan a ton. Source: Bussines Times

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