Malaysian palm oil futures fell on Tuesday, along with other edible oil markets, after a US agricultural report surprised investors with higher-than-expected supplies of competing oilseeds.
Sentiment was also hurt by forecasts of a seasonal rise in palm oil output as trees produce more fruit, although some traders said stockpiles could stay below the two million tonne level for now.
Stocks at end-August stood at 1.67 million tonnes, having fallen nearly 40 per cent from record highs in December.
US soybean stockpiles were estimated at 141 million bushels, the Agriculture Department said on Monday, far larger than the 124 million expected by analysts and traders. Chicago soybeans slid to a six-week low.
Larger supplies of soybeans for crushing into soyoil could snatch demand away from palm oil, a rival vegetable oil.
"The market is bottoming. Soy is one of the reasons why the market is down today, along with the stronger ringgit and the rise in production," said a trader with a local commodities brokerage.
"But a lot of traders believe that prices won’t fall to RM2,200 because despite the pickup in production, end-stocks don’t show signs of going above two million metric tonnes," the trader added. "So that ensures the market at RM2,250."
By the mid-day break, the benchmark December contract on the Bursa Malaysia Derivatives Exchange had slipped 1.5 per cent to RM2,285 per tonne. Total traded volumes stood at 8,500 lots of 25 tonnes each, below the average 12,500 lots.
The Malaysian ringgit which strengthened 0.3 per cent against the US dollar early Tuesday also weighed on palm, and made the ringgit-priced feedstock more expensive for overseas buyers and refiners.
On the technical front, Malaysian palm oil looks neutral in a range of RM2,265-RM2,327 per tonne and only an escape will point to a direction, said Reuters market analyst Wang Tao.
Amid forecasts of rising Southeast Asian palm oil output, prices may get some respite from the monsoon season that could hit the region in October.
Indonesia, the world’s largest producer, said on Monday its production may rise only five per cent to 26.7 million tonnes this year due to wet weather conditions, below previous estimates of 28 million tonnes.
Wet weather could disturb pollination of fresh fruit bunches, while heavy rain storms could disrupt harvesting and complicate logistics.
In other markets, Brent crude fell below US$108 a barrel on Tuesday to trade near a 7-week low on worries a shutdown of the US government may crimp oil demand, while investors also eyed easing tensions in US-Iran nuclear talks.
In competing vegetable oil markets, the US soyoil contract for December was flat in early Asian trade. The Dalian Commodities Exchange was closed for a holiday and will reopen on Tuesday October 8.-- Reuters