Palm to drop for second week on weak soya, concerns about demand

Malaysian palm futures fell on Friday, and are headed for another week of losses. Weak soybean prices and looming concerns about demand have weighed them down.

At midday, the benchmark palm oil contract on Bursa Malaysia's Derivatives exchange for February delivery fell 81 ringgit or 1.7% to 4,691 Ringgit ($1,050.62) per metric ton.

David Ng is a proprietary trader with Kuala Lumpur's trading firm Iceberg X Sdn. Bhd. He said that the crude palm oil futures were lower because of lower soybean oil prices, and concern about a weaker demand for palm oil in the coming week.

Dalian's palm oil contract dropped 0.91%, while the most active soyoil contract in Dalian fell by 1.2%. Chicago Board of Trade soyoil prices fell 0.14%.

As palm oil competes to gain a share in the global vegetable oil market, it tracks the price changes of competing edible oils.

Oil prices rose after Russia announced that it fired a missile at Ukraine, and warned of an expanding conflict. This raised the prospect of a tightening of crude supplies.

Palm oil is a better option as a biodiesel feedstock because crude oil futures are stronger.

The palm ringgit's currency, the U.S. Dollar, fell by 0.11%, making the commodity more affordable for buyers who hold foreign currencies.

GAPKI, the industry's main association, reported that Indonesian palm oil stocks increased in September, as both exports and consumption decreased, but output improved slightly.

Technical analyst Wang Tao stated that palm oil could retest the support level of 4,647 ringgit for a metric ton. A break below this mark would open the door towards the range 4,510-4,595 rings. ($1 = 4.4650 ringgit)

(source: Reuters)