Malaysian palm oil futures fell on Monday as fears of rising output amid slackening overseas demand piled pressure on to the tropical oil, while weaker comparative soyoil prices weighed. Market players said production in Malaysia, the world's second-largest grower, likely picked up in July and could continue to rise August onwards. Export demand, however, dwindled at the end of July as reported by cargo surveyor data.
"Our production is very, very good. It is picking up steam," said a trader with a local commodities brokerage in Malaysia. "But demand looks to be not as vibrant as what we saw in the month of July. We're a little sceptical whether we can maintain the momentum in August," the trader added. The benchmark October contract on the Bursa Malaysia Derivatives Exchange had edged down 0.7 percent to 2,268 ringgit ($709) per tonne by Monday's close.
Total traded volume stood at only 19,376 lots of 25 tonnes, compared with the average 35,000 lots. Palm oil output in the world's top growers Indonesia and Malaysia is expected to gain momentum in the final months of this year and keep a lid on prices, although a potential El Nino and tree stress could curb the rise, planters and analysts said on Monday.
Technicals were bearish. Malaysian palm oil is expected to break a support at 2,250 ringgit per tonne and fall more towards 2,220 ringgit, driven by wave 5, according to Reuters market analyst Wang Tao. Prospects of bigger supplies of soybeans, thanks to near-record production in the United States, have dragged soyoil prices and narrowed the spread to competing palm.
Weaker soyoil prices paint a bleak picture for palm, a common food and fuel substitute, as it has to remain competitive to rival soyoil or risk losing demand to price-sensitive buyers such as India and China. Kenanga Investment Bank analyst Alan Lim cut forecasts for average crude palm oil prices this year to 2,500 ringgit per tonne from 2,800 ringgit, citing "lower soybean oil prices estimates".
Stockpiles in July likely rose to 1.65 million tonnes due to weaker-than-expected exports in the month, Lim added. "We believe that palm oil lost its competitiveness against soybean oil in July as soybean oil prices have declined significantly by 7 percent to 36.11 US cents per pound," he said in a research note on Monday.
Cargo surveyor Societe Generale de Surveillance on Monday reported that exports of Malaysian palm oil products for July fell 2.8 percent to 1.35 million tonnes as demand to China, Pakistan and the US fell. Another cargo surveyor, Intertek Testing Services, earlier showed that exports for the same period also fell 2.8 percent. The US soyoil contract edged down 0.1 percent in late Asian trade, while the most active soybean oil contract on the Dalian Commodities Exchange fell 0.5 percent.
"Our production is very, very good. It is picking up steam," said a trader with a local commodities brokerage in Malaysia. "But demand looks to be not as vibrant as what we saw in the month of July. We're a little sceptical whether we can maintain the momentum in August," the trader added. The benchmark October contract on the Bursa Malaysia Derivatives Exchange had edged down 0.7 percent to 2,268 ringgit ($709) per tonne by Monday's close.
Total traded volume stood at only 19,376 lots of 25 tonnes, compared with the average 35,000 lots. Palm oil output in the world's top growers Indonesia and Malaysia is expected to gain momentum in the final months of this year and keep a lid on prices, although a potential El Nino and tree stress could curb the rise, planters and analysts said on Monday.
Technicals were bearish. Malaysian palm oil is expected to break a support at 2,250 ringgit per tonne and fall more towards 2,220 ringgit, driven by wave 5, according to Reuters market analyst Wang Tao. Prospects of bigger supplies of soybeans, thanks to near-record production in the United States, have dragged soyoil prices and narrowed the spread to competing palm.
Weaker soyoil prices paint a bleak picture for palm, a common food and fuel substitute, as it has to remain competitive to rival soyoil or risk losing demand to price-sensitive buyers such as India and China. Kenanga Investment Bank analyst Alan Lim cut forecasts for average crude palm oil prices this year to 2,500 ringgit per tonne from 2,800 ringgit, citing "lower soybean oil prices estimates".
Stockpiles in July likely rose to 1.65 million tonnes due to weaker-than-expected exports in the month, Lim added. "We believe that palm oil lost its competitiveness against soybean oil in July as soybean oil prices have declined significantly by 7 percent to 36.11 US cents per pound," he said in a research note on Monday.
Cargo surveyor Societe Generale de Surveillance on Monday reported that exports of Malaysian palm oil products for July fell 2.8 percent to 1.35 million tonnes as demand to China, Pakistan and the US fell. Another cargo surveyor, Intertek Testing Services, earlier showed that exports for the same period also fell 2.8 percent. The US soyoil contract edged down 0.1 percent in late Asian trade, while the most active soybean oil contract on the Dalian Commodities Exchange fell 0.5 percent.
