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Palm oil tumbled to the lowest level
in nine months and was poised to enter a bear market after the
U.S. government forecast record inventories of soybeans used to
produce an alternative cooking oil.
Futures dropped as much as 1.3 percent to 2,316 ringgit ($729) a metric ton on the Bursa Malaysia Derivatives, the lowest level since Oct. 7. A close at 2,320 ringgit would be 20 percent less than the 2,901 ringgit settlement on March 10, meeting the common definition of a bear market. Prices ended the morning session at 2,318 ringgit.
Palm, used in everything from food to biofuels, slumped 13 percent this year as usage in biodiesel trailed estimates amid expanding production. Record stockpiles of soybeans are adding to a global glut of cooking oils as increasing supplies send prices of corn and wheat into bear markets, cutting world food costs measured by the United Nations for a third month in June. Petroleum prices have also dropped for three straight weeks.
“The declines in soybean oil and crude oil will weigh heavily on palm,” said David Ng, a Kuala Lumpur-based derivatives specialist at Phillip Futures Sdn. “The spread between soybean oil and palm oil has narrowed quite significantly and a lot of buyers are shifting to other alternatives, mainly soybean oil and sunflower.”
Futures may rally less than earlier forecast as demand misses estimates and an El Nino starts later than expected, according to Dorab Mistry, director at Godrej International Ltd. Prices may climb to 2,800 ringgit by December if the weather event occurs from mid-August, Mistry said on June 26, cutting his March forecast for an increase to 3,500 ringgit.
Production in Indonesia may reach a record 30.5 million tons or more this year while Malaysia’s output will total an all-time high of 19.7 million tons to 19.9 million tons, according to Mistry. The two Southeast Asian producers together account for 86 percent of world supplies.
Soybean oil futures were little changed at 36.93 cents a pound on the Chicago Board of Trade, after declining 1.7 percent on July 11. Soybeans slumped to $10.65 on July 11, the lowest level since October 2010, and traded at $10.6875 today. Prices declined for a 10th day through July 11, the longest slump since 1973.
Refined palm oil for January delivery fell as much as 2.2 percent to 5,676 yuan ($914) a ton on the Dalian Commodity Exchange, the lowest level since Jan. 30, before trading at 5,710 yuan. Soybean oil lost as much as 1.3 percent to 6,468 yuan, lowest price since Jan. 30.
To contact the reporter on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net
To contact the editors responsible for this story: James Poole at jpoole4@bloomberg.net Thomas Kutty Abraham
Futures dropped as much as 1.3 percent to 2,316 ringgit ($729) a metric ton on the Bursa Malaysia Derivatives, the lowest level since Oct. 7. A close at 2,320 ringgit would be 20 percent less than the 2,901 ringgit settlement on March 10, meeting the common definition of a bear market. Prices ended the morning session at 2,318 ringgit.
Palm, used in everything from food to biofuels, slumped 13 percent this year as usage in biodiesel trailed estimates amid expanding production. Record stockpiles of soybeans are adding to a global glut of cooking oils as increasing supplies send prices of corn and wheat into bear markets, cutting world food costs measured by the United Nations for a third month in June. Petroleum prices have also dropped for three straight weeks.
“The declines in soybean oil and crude oil will weigh heavily on palm,” said David Ng, a Kuala Lumpur-based derivatives specialist at Phillip Futures Sdn. “The spread between soybean oil and palm oil has narrowed quite significantly and a lot of buyers are shifting to other alternatives, mainly soybean oil and sunflower.”
Shrinking Discount
Palm oil’s discount to soybean oil narrowed 70 percent in the past year to about $84 a ton, data compiled by Bloomberg show. That’s encouraging refiners in India, the world’s largest palm buyer, to turn to soybean and sunflower oils. India’s palm imports probably fell for a second month in June to 625,000 tons from a year earlier, a Bloomberg survey showed last week.Futures may rally less than earlier forecast as demand misses estimates and an El Nino starts later than expected, according to Dorab Mistry, director at Godrej International Ltd. Prices may climb to 2,800 ringgit by December if the weather event occurs from mid-August, Mistry said on June 26, cutting his March forecast for an increase to 3,500 ringgit.
Production in Indonesia may reach a record 30.5 million tons or more this year while Malaysia’s output will total an all-time high of 19.7 million tons to 19.9 million tons, according to Mistry. The two Southeast Asian producers together account for 86 percent of world supplies.
Soybean Harvest
U.S. farmers will harvest 3.8 billion bushels of soybeans this year, compared with 3.635 billion estimated in June and last year’s crop of 3.289 billion, the Department of Agriculture estimates. World output will be 304.8 million tons from a previous estimate of 300 million tons, while inventories will be a record 85.31 million tons, the agency said on July 11.Soybean oil futures were little changed at 36.93 cents a pound on the Chicago Board of Trade, after declining 1.7 percent on July 11. Soybeans slumped to $10.65 on July 11, the lowest level since October 2010, and traded at $10.6875 today. Prices declined for a 10th day through July 11, the longest slump since 1973.
Refined palm oil for January delivery fell as much as 2.2 percent to 5,676 yuan ($914) a ton on the Dalian Commodity Exchange, the lowest level since Jan. 30, before trading at 5,710 yuan. Soybean oil lost as much as 1.3 percent to 6,468 yuan, lowest price since Jan. 30.
To contact the reporter on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net
To contact the editors responsible for this story: James Poole at jpoole4@bloomberg.net Thomas Kutty Abraham
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