By Claire Leow and Yoga Rusmana Jan. 22 (Bloomberg) -- Palm oil slumped for a third week as commodities fell and on concern demand may not pick up enough to absorb record edible oils supply. April-delivery palm oil fell 1.3 percent to 2,455 ringgit ($722) a metric ton on the Malaysia Derivatives Exchange. The contract declined 1.4 percent this week. The Reuters/Jefferies Commodity Price Index declined 0.7 yesterday, extending a 1.3 percent decline the previous day, on concern that the economic recovery may be derailed in China if the country raises interest rates and in the U.S. because of banking curbs proposed by President Barack Obama. China is the largest consumer of edible oils and the China National Grain & Oils Information Center said this week imports of vegetable oil may fall to below 9 million tons in 2009-2010 from 9.46 million the previous year because of ample stockpiles. About two-thirds of its imports are palm oil. “The Chinese market looks uncertain,” said Jessie Fan, a futures trader at TA Futures Sdn. “All these uncertainties will lock us in a 100-ringgit range next week,” she said, suggesting the tropical oil will trade in a 2,400-2,500 ringgit range. While palm oil will come under pressure from falling crude oil and soybean prices, supplies may be disrupted by the El Nino weather event which would turn attention back to demand-supply fundamentals, said Nirgunan Tiruchelvam, a plantation analyst at Royal Bank of Scotland Asia Securities (Singapore) Pte. El Nino reduces rainfall and can cause drought in Southeast Asia, where most of the world’s palm oil is produced in Indonesia and Malaysia. El Nino “There are very strong indications El Nino may have already commenced,” he said. Central Pacific Ocean temperatures are “well above El Nino thresholds,” and “generally remain above values observed at the peak of the 2006 El Nino event,” the Australian Bureau of Meteorology said on its website today. “If there is El Nino, the production of crude palm oil will suffer,” Tiruchelvam said. There will be an increase in crude palm oil of “about 10 percent in terms of average prices,” he said, forecasting $750 a ton for most of 2010. Palm oil in Rotterdam averaged $681 a ton in 2009. Soybeans for March delivery on the Chicago Board of Trade was little changed at $9.5425 a bushel at 6:01 p.m. Singapore time. It has lost 2.1 percent so far this week. The contract had fallen as low as $9.4075 this week, a loss of 7 percent from the price before the U.S. Department of Agriculture estimated Jan. 12 world soybean production in the year from Oct. 1 at 253.4 million tons. Soybean oil for March delivery dropped 0.2 percent to 36.93 cents a pound at 6:00 p.m. Singapore time. Soybean oil’s premium over palm oil narrowed to $75 a ton this week, the lowest price in at least a year and less than half the 12-month average, according to Bloomberg data. The premium is now at $92.88 a ton. Dalian Prices On the Dalian Commodity Exchange, soybeans for September delivery lost 0.3 percent to 3,889 yuan ($570) a ton, above a two-month low reached this week. Soybean oil for delivery in September lost 0.6 percent this week to 7,452 yuan while palm oil dropped 0.5 percent to 6,808 yuan. Meantime, weaker palm oil prices this week deterred cash sales, Aziz Kahar, head of sales at Kharisma Pemasaran Bersama, which sells from state plantations, said by phone. The company didn’t hold a tender today, he said. PT Astra Agro Lestari, the nation’s largest publicly traded plantation company, sold 3,000 tons of the 4,500 tons of palm oil offered. Palm oil for delivery from Belawan and Dumai ports on Sumatra island, the main exit points, fetched 7,225 rupiah a kilogram ($773 a ton), compared with between 7,209 rupiah and 7,225 rupiah yesterday. Palm oil also fell with commodities in a broad slide. To contact the reporter on this story: Claire Leow in Singapore at cleow@bloomberg.net; Yoga Rusmana in Jakarta at yrusmana@bloomberg.net

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