Palm Oil Extends Losses on Production Increase, Export Decline

June 16 (Bloomberg) -- Palm oil futures fell for a fourth day on concern that exports are slowing at a time of seasonally higher production.

The tropical oil extended declines after data yesterday showed that exports from Malaysia, the second-largest producer, dropped in the first half of this month. Shipments fell 10 percent to 560,416 metric tons in the first 15 days of June, compared with May, independent cargo surveyor Intertek said. Societe Generale de Surveillance, another surveyor, said exports fell 9.4 percent in the period to 570,187 tons.

Last week, Malaysia’s Palm Oil Board said production of the commodity had surged 8.5 percent in May to 1.4 million metric tons compared with April. Stockpiles grew 5.7 percent to 1.37 million tons, the first increase in six months, the board said.

“Fundamentally, if exports are too slow and production continues to be good,” prices will come under pressure, Ong Chee Ting, an analyst at Maybank Investment Bank Bhd., said from Kuala Lumpur.

“The weather this month so far is good, so potentially we could see production rising again” for June, which “means inventory should be higher by the end of this month, again bearish news for crude palm oil,” he said.

August-delivery palm oil reversed early gains to drop as much as 1.3 percent to 2,369 ringgit ($670) a metric ton on the Malaysia Derivatives Exchange. The contract traded at 2,380 ringgit a ton at 11:54 a.m. local time.

Dalian palm oil for September delivery dropped 0.4 percent to 6,420 yuan ($939) a ton at the 11:30 a.m. trading pause. China is the largest user of palm oil.

Indonesia and Malaysia are the largest palm oil producers, accounting for about 90 percent of world output. Malaysian data are closely followed for industry trends. Indonesia doesn’t release monthly figures.