Singapore. Palm oil futures dropped for a fifth day straight on Monday on concerns that a global recession will cut demand and add to an oversupply that’s driven Malaysian stockpiles to a record.
Inventories gained to 2.09 million tons in October, the Malaysian Palm Oil Board said last week.
Output also rose 4.6 percent to a record 1.65 million tons from the previous month. Japan, Hong Kong and the Euro-zone countries fell into recession in the past quarter.
“Crude palm oil production is galloping,” said Nirgunan Tiruchelvam, an analyst at ABN Amro Asia Securities (Singapore) Pte. “We expect production growth to be higher than demand growth, which will put a damper on palm oil prices.”
Palm oil for January delivery on the Malaysia Derivatives Exchange fell 1.5 percent to 1,433 ringgit ($398) a metric ton, the lowest since Oct. 24. The commodity has lost 68 percent since reaching a record 4,486 ringgit a ton in March.
Indonesia could produce 18.6 million tons this year, said Derom Bangun, president of Indonesia’s palm oil association.
Indonesia and Malaysia, the world’s largest palm oil producers, will require mandatory blending of palm-oil-based biodiesel as alternate energy to reduce energy costs. The countries have also pledged to replant aging palms to cut 800,000 tons of supply next year.
“That will have minimal impact because most of the demand for biodiesel is in Europe and the US, where the markets are more developed,” Tiruchelvam said.
Palm oil futures could drop to 1,200 ringgit a ton if crude oil falls to $50 a barrel or lower, Dorab Mistry, director at Godrej International Ltd., said on Friday.