Malaysian crude palm oil futures tumbled 4.2 per cent to a 14-week low yesterday on fears global economic recovery could stall in the second half of the year, triggering a rush out of commodities.
Palm oil’s decline was more pronounced than that of Dalian soyoil markets due to prospects of higher production and fears that much awaited festival demand starting in mid-July, from China, India and Pakistan, will not be as strong as in previous years.
“Demand is a big question mark now, if this news about the global economy still struggling is true, we are in for a massive speculative selldown,” said a trader with a foreign commodities brokerage.
The benchmark September contract on Bursa Malaysia’s Derivatives Exchange fell as much as RM86 to RM1,983 per tonne, a level unseen since March 31, before settling at RM2,002.
Volumes shot up to 14,560 lots at 25 tonnes each.
India’s June edible oil imports may fall 4 per cent from May, registering their first monthly fall since March, while annual growth is likely to slow to 21 per cent after doubling in the previous two months, a Reuters poll showed.
The possible weakness in exports suggested that Malaysia’s June palm oil stocks likely rose 4.6 per cent to a four-month high, according to another Reuters poll.
Some traders said the palm market clawed back some losses later in the day on a report by Australia’s Bureau of Meteorology, which noted that the development of El Nino is increasing and could lead to a medium strength event.
El Nino brings hotter weather to top palm producers Malaysia and Indonesia that can sap palm oil yields 12-18 months later, and also impedes India’s June-Sept monsoon, which could hamper oilseed crops and lead to more imports of palm oil.
Economy jitters continued to sweep financial markets on Wednesday, weakening stocks, propelling the Japanese yen to a six-week high and dragging oil down to around US$62 a barrel.
Oil, on course for its sixth consecutive fall and longest losing streak since mid-December, compounded the decline in vegetable oil markets as some soyoil is channelled into the US and South American biofuel sectors.
The most-active January soybean oil contract on China’s Dalian Exchange dropped 3.8 per cent while US soyoil futures inched lower in late Asian trade after falling 4.1 per cent in the previous session.
Indonesian palm markets were closed on yesterday for a public holiday in conjunction with the presidential elections.
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