Palm Oil Drops to Two-Month Low Amid Outlook on China Demand

Jan. 21 (Bloomberg) -- Palm oil declined to the lowest in two months amid concern imports by China, the largest vegetable oils user, may decline this year because of ample supplies of domestic and imported oilseeds and oils.

April-delivery palm oil dropped as much as 1.5 percent to 2,407 ringgit ($715) a metric ton on the Malaysia Derivatives Exchange, the lowest intraday price since Nov. 20. The contract paused at 2,440 ringgit at the 12:30 p.m. trading break.

China’s vegetable oil purchases may fall from last year’s record to below 9 million metric tons in 2009-2010, the China National Grain & Oils Information Center said today. On Jan. 13, it estimated palm oil imports climbed 23 percent last year to an all-time high of 6.4 million tons and rapeseed imports reached 3.2 million tons, the highest-ever.

“The key reason” for lower imports this year “is higher domestic soybean and oilseeds supplies,” China National Grain said in a report today in Chinese.

Malaysian palm oil prices are falling despite an increase in exports because of the bumper soybean crop and edible oils supply, the report said. Exports gained 6.9 percent in the first 20 days of January to 945,311 tons, according to Societe Generale de Surveillance. The gain was 7.7 percent to 924,003 tons, rival cargo surveyor Intertek said.

World soybean production in the crop year that began Oct. 1 will be a record 253.4 million tons, up from 210.9 million last year, the U.S. Department of Agriculture said Jan. 12.

Soybeans for March delivery on the Chicago Board of Trade climbed for the first time in five days, gaining 0.4 percent to $9.535 a bushel at noon Singapore time. That’s still 5.6 percent below the price before the USDA forecast. Soybean oil for March delivery traded in Chicago is trading at 36.82 cents a pound at 11:59 a.m., a loss of 7 percent since the USDA report.

Premium

The premium of soybean oil over palm oil narrowed to $75 a ton this week, the lowest in at least a year and less than half the 12-month average, according to Bloomberg data. The premium is now at $89.27 a ton.

September-delivery soybeans in Dalian were little changed at the 11:30 a.m. trading break, at 3,862 yuan ($566) a ton. It was as low as 3,852 yuan earlier, the lowest in intra-day trading since Nov. 24.

Dalian soybean oil for September delivery dropped a second day, losing 0.3 percent to pause at 7,336 yuan a ton. Dalian palm oil for September also dropped 0.3 percent to 6,684 yuan at the break.