Palm oil production drops, and it is likely to be the second consecutive week of a loss in output. Stock fears are also causing a decline.

Malaysian palm futures were down slightly on Friday, indicating that they are on course for a second loss in a week, due to the expectation of a higher production and bigger stocks.

By midday, the benchmark palm oil contract on 'the Bursa Derivatives Market?was down by 7 ringgits, or 0.16%. It was trading at?4,499?ringgit ($1,106.49), a metric tonne. The contract is down 1.4% this week.

Anilkumar bagani, head of commodity research at Sunvin Group, says that the futures for crude palm oil are also trading lower due to market participants' concern about a possible increase in production, which is expected to lead to an increase in stocks.

Dalian's soyoil contract, which is the most active contract, fell by 0.2% while palm oil contracts dropped by 0.95%. The Chicago Board Of Trade is closed on a public holiday.

Palm oil follows the price movement of competing edible oils as it competes to gain a share of the global vegetable oils markets.

According to a survey, Malaysian palm oil inventories rose to their highest levels on record in June as production outpaced growth.

Bagani said that the expected export supply shortage from 'Indonesia, due to its mandate of 50% biodiesel blend, and talk of a super El Nino in this season, cushioned prices from a more steep decline.

The oil prices rose before the long holiday weekend here in the U.S.

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

The palm ringgit's currency, the dollar, has strengthened by 0.29%, making it slightly more expensive to buyers who hold foreign currencies.

Technical analyst Wang Tao stated that palm oil could test support at 4,485 Ringgit per metric tonne. A break below this level would open the door to 4,440 Ringgit.

1 Please enter the freight rate from Peninsula Malaysia/Sumatra to China, India Pakistan and Rotterdam and then press Enter or double-click between the brackets. Double-clicking on the codes in brackets will allow terminal users to see the prices of edible oil for cash and futures. To move to the next page, press F12. To go back, hit F11. 1

(source: Reuters)