Palm prices fall to two-week lows on rising stocks

The price of Malaysian palm oils fell to their lowest level in two weeks, on Friday, due to rising stocks, but concerns about future supply constraints limited the decline.

The benchmark palm oil contract for November delivery at the Bursa Derivatives exchange was down by 67 ringgit or 1.37% to 4,818 Ringgit ($1,184.37), the lowest price since August 27.

After a 0.72% increase last week, the contract dropped 2.25%.

Data from the industry regulator shows that Malaysian palm oil inventories reached an eight-month peak in August, as production increased to its highest level since December while exports decreased.

A CIMB Securities report?said that the larger-than expected inventory?build reflects a growing imbalance between recovering season production and softer demand for exports.

The report said that "the higher stock level may cap the near-term crude oil price upside, but downside could?remain cushioned" if tree stress continued to limit production growth.

It noted that the production is likely to remain seasonal in the months ahead, but a significant recovery in exports would be more important in order to reduce inventories.

Exports of palm oil-based products from Malaysia for the period September 1-10 fell between 11.7% to 17.5% compared with a month ago, according to cargo surveyors.

Oil prices fell but remained on course to end the week at $100 per barrel for the first time since mid-May as attacks along major Middle East shipping routes stoked fears of a prolonged supply disruption.

Palm is less appealing as a biodiesel feedstock due to the weaker crude oil futures.

Dalian's soyoil contract, which is the most active in Dalian, fell by 0.31% while palm oil contracts dropped by 1.4%. Prices of soyoil on the?Chicago Board of Trade?were 1.63% lower.

Palm oil monitors?the movements in price of rival edible oils as it competes to gain a share on the global vegetable oils markets.

(source: Reuters)