CPO futures drop as supply rises

The industry's outlook appears weak due to higher palm oil output and slower exports, say traders

MALAYSIA's crude palm oil futures (FCPO) fell for the third straight day as the supply of palm oil exceeds demand.

Yesterday, the third month benchmark October contract on the Bursa Malaysia Derivatives Exchange fell RM43 to close at RM3,392 per tonne.

This is 25 per cent below its all-time high of RM4,486 per tonne in March but still 10 per cent higher than at the start of the year.

Traders said the industry's outlook appears weak due to higher palm oil output and slower exports.

"Prices are under pressure, it will most probably drop some more because the trees are producing more fruits," said a trader with a foreign palm oil company.

FCPO moves in tandem with soyaoil in other markets because these two commodities are used interchangeably to make margarine, detergent, cosmetics and biodiesel.

Yesterday, August soyaoil at the Chicago Board of Trade fell 0.4 per cent while the most-active January 2009 soyaoil contract on China's Dalian Commodity Exchange dropped 1.6 per cent.