BLBG: Palm Oil Declines as Rally to 34-Month High Increases Soybean Oil Appeal
Palm oil dropped after a rally to a 34-month high narrowed the discount to soybean oil, boosting the appeal of the rival oil for use in food and fuels.
The March-delivery contract fell as much as 1.9 percent to 3,791 ringgit ($1,235) a metric ton on the Malaysia Derivatives Exchange, paring the weekly gain to 0.7 percent, and ended the morning session at 3,797 ringgit. Prices climbed to the highest level in 34 months on Jan. 4 on concern that Malaysian reserves may have dropped to a five-month low in December.
Soybean oil’s premium over palm oil contracted to $10.09 a ton yesterday, compared with the 12-month average of $84.7 a ton, according to Bloomberg data. Soybean oil traded at a discount of $14.30 on Jan. 4, the first time since June 2007 that the edible oil has been cheaper than palm.
“The rally has prompted profit-booking among investors and with palm oil at parity with soybean oil, there will be less buying,” said Krishna Reddy, an analyst at Way2Wealth Commodities Ltd. in Mumbai.
Palm oil has rallied 67 percent in the past six months on concern that cooking-oil supplies may tighten as dry weather in Argentina weakened the crop in the largest soybean-oil producer and rains damaged oil-palm harvests in Indonesia and Malaysia.
March-delivery soybean oil shed as much as 0.8 percent to 56.95 cents a pound. Futures jumped 43 percent in 2010 for a second straight annual gain.
“Concerns over the Argentine soybean crops are alive and that should support a rally in prices,” Reddy said.
India Plantations
India, the biggest buyer of palm oil, plans to increase its oil-palm area more than sevenfold as it seeks ways to lower its cooking-fat import bill of $8.4 billion, Farm Secretary P.K. Basu said in an interview yesterday in New Delhi. Plantations may cover 1 million hectares (2.47 million acres) in the next five years, from 130,000 hectares now, he said.
Palm oil for September delivery on the Dalian Commodity Exchange dropped as much as 1.5 percent to 9,934 yuan ($1,499) a ton and soybean oil for delivery in the same month declined as much as 1.6 percent to 10,630 yuan a ton. CME Group Inc.’s March palm oil contract, pegged to the Malaysian benchmark price, gained as much as 0.9 percent to $1,249.25 a ton and traded at $1,244.50 at 12:13 p.m. in Singapore.
To contact the reporter on this story: Thomas Kutty Abraham in Mumbai at tabraham4@bloomberg.net;
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net
