Palm oil dropped for a third day on speculation that output in Malaysia, the world’s second-biggest producer, may climb for a ninth month and a decline in soybean oil prices may spur consumers to switch to the alternative oil.
The contract for delivery in February lost as much as 0.9 percent to 2,606 ringgit ($809) a metric ton on the Bursa Malaysia Derivatives and ended the morning session at 2,614 ringgit. Futures rallied to 2,692 ringgit on Nov. 22, the highest level for the most-active contract since September 2012, extending a bull market on concern that output will trail analysts’ estimates for Indonesia, the biggest supplier.
Malaysia’s production climbed for eight straight months to 1.97 million tons in October, the highest level since September 2012, according to the nation’s palm oil board. Output gained about 4.1 percent in the first 20 days of this month according to planters, Paramalingam Supramaniam, director at brokerage Pelindung Bestari Sdn. in Selangor said yesterday.
The increase in output “is against market expectation of a decline,” said Alan Lim Seong Chun, an analyst at Kenanga Investment Bank Bhd. “Usually November production is always lower than October. This year shows a slight change in the seasonal pattern, so the peak production may be actually shifting from October to November.”
The decline in soybean oil narrowed its premium over palm oil, potentially prompting consumers to switch from the tropical oil, Lim said. The spread between the two cooking oils narrowed to about $90 a ton today, compared with an average of $262 this year, according to data compiled by Bloomberg.
Soybean oil was little changed at 40.92 cents a pound on the Chicago Board of Trade after dropping 1.2 percent at the close yesterday. Soybeans for January delivery lost 0.3 percent to $13.2575 a bushel.
Refined palm oil for May delivery declined 1.7 percent to 6,338 yuan ($1,040) a ton on the Dalian Commodity Exchange. Soybean oil fell 0.7 percent to 7,266 yuan.
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Source : Bloomberg