Palm Oil Declines Amid U.S., Argentina Soybean Crops Outlook

Oct. 6 (Bloomberg) -- Palm oil fell as the prospect of a record U.S. soybean crop and a bigger harvest of the oilseed in Argentina reduced concern over a shortage in edible oil supplies.

Palm oil, which competes with soybean oil for use in food and fuel, has climbed 20 percent this year on concern there may be global oilseed shortage after drought damaged a quarter of the soybean harvest in Argentina, the top exporter of soybean oil. It helped U.S. farmers to plant a record crop.

December-delivery palm oil lost as much as 1.4 percent to 2,013 ringgit ($586) a ton on the Malaysia Derivatives Exchange, and paused at 2,023 ringgit at the midday break. Futures fell 11 percent last month in anticipation of the U.S. soybean crop.

Soybean oil, traded on the Chicago Board of Trade, is 27 percent more expensive than palm oil.

“Palm oil is affordable again,” Su-Yin Teoh, a strategist at Deutsche Bank (Malaysia) Berhad, said today.

Supplies of palm oil slowed in September due to the Muslim fasting month and subsequent holiday, and may pick up this month. About 90 percent of the world’s palm oil is produced in Indonesia and Malaysia, both predominantly Muslim countries.

Malaysia’s palm oil output in August reached 1.49 million tons, the highest since a record set in November, according to the nation’s palm oil board. That lifted stockpiles to a six- month high of 1.42 million tons. September data is due next week.

Argentina may grow 63 percent more soybeans next year than the drought-reduced harvest this year, as farmers plant less of other crops, the U.S. Department of Agriculture’s Foreign Agricultural Service said.

Output may total 52 million tons in the year starting April 1, up from the USDA’s estimate of 32 million collected this year, according to the report. The USDA forecast a 2010 harvest of 51 million tons in September.

Farmers will sow 18.5 million hectares (45.7 million acres), up from an estimated 17.5 million planted a year earlier, with less land devoted to wheat, corn, sunflowers and cattle pasture, according to the report.