Crude palm oil futures dropped for a third day as the commodity tracked losses in crude oil and soybeans on concern the economic slowdown will cool demand for commodities.
Palm oil for April delivery dropped as much as 3.3 percent to 1,770 ringgit ($490) a metric ton on the Malaysia Derivatives Exchange, extending last week’s drop. It was down 1.5 percent to 1,803 ringgit at the 12:30 p.m. trading break.
Trading of the benchmark contract resumed after a two-day holiday marking the Chinese Lunar New Year, during which time crude oil in New York slumped 11 percent and soybean oil, the main substitute for palm oil, dropped 2.5 percent in Chicago.
“The market is reacting after net losses for soybean oil and crude in the last two days,” S. Chandran, a trader at CIMB Futures Sdn. Bhd., said by telephone from Kuala Lumpur. “That’s providing the selling pressure in the palm oil market.”
Commodity prices tumbled the most in two weeks as the global recession lowered demand for energy, metals and grains.
The Reuters/Jeffries CRB Index of 19 raw materials fell 3.7 percent, the most since Jan. 12.
U.S. consumer confidence in January fell to the lowest level ever, and the decline in house prices in major metropolitan areas deepened in November. State figures released yesterday showed the unemployment rate jumped in all 50 states in December.
Growth Contracts
Japan’s exports plunged 35 percent in December, the most on record, while China’s economy grew at the slowest pace in seven years in the fourth quarter. Last week, the U.K. said its economy shrank 1.5 percent in the fourth quarter, the most since 1980.
China, the world’s largest user and buyer of palm oil, is shut for a week-long holiday. The Dalian Commodity Exchange for vegetable oils is closed for trading.
“There should be more buying when market players are back next week,” Chandran said. “I see good support at 1,790-1,800 ringgit.”
Soybean oil for March delivery is little changed at 32.75 cents a pound at 12:03 p.m. Singapore time in after-hours trade on the Chicago Board of Trade. That makes it 45 percent more expensive than palm oil, according to Bloomberg data.
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