Palm prices drop over 1% due to price rise and sluggish demand for exports

Malaysian palm oil futures fell more than 1% for the second consecutive session on Wednesday, as recent rallies hurt its 'competitiveness with rival soyoil.' Sluggish exports also fueled concerns about a soaring inventory.

By midday, the benchmark palm oil contract on Bursa Derivatives exchange for November delivery was down 79 Ringgit or 1.6% at 4,867 Ringgit ($1,209.79).

The contract dropped by 1.43% during the previous session.

Paramalingam Supramaniam said that the recent price rise of palm oil has?eroded some demand, as prices for soybean oil at Indian ports have now become cheaper than 'palm oil. Meanwhile, refining margins are razor thin.

He said that if demand did not pick up, palm's inventories were likely to rise. This would be more true as the company enters its peak production months in September and October.

Palm oil rose?for five consecutive sessions?through August 21 gaining 6.54% and closed above 5,001 ringgit for first time since December 20,24.

Intertek Testing Services, a cargo surveyor, estimated that the exports of palm oil products from Malaysia for August 1-25 were down 20% compared to a month ago. AmSpec Agri Malaysia will release its estimates later in the day.

Dalian's palm oil contract, which is the most active contract in Dalian, fell 0.43%. Prices of soyoil on the Chicago Board of Trade fell by 1.17%.

As they compete to gain a piece of the global vegetable oil market, palm oil follows price changes of rival edible oils. Oil prices dropped by more than $2 per barrel as Iran and Oman renewed hopes for a reopening of the Strait of Hormuz and removing shipping restrictions in this key Middle East region.

Weaker crude futures make 'palm' a less appealing option for biodiesel feedstock. The palm currency, the ringgit, has strengthened by 0.52% against dollar making it more expensive to buyers with foreign currencies.

(source: Reuters)