Malaysia's palm oil futures drop again

Malaysia's palm oil futures drop again

KUALA LUMPUR (Reuters): The selldown in Malaysian palm oil futures continued for a second day on Thursday, with dealers saying there was no positive news to halt the market slide on worries of oversupply and weak exports.

Nearby contracts, which fell below the 800 ringgit (US$210) a ton support level at Wednesday's close, saw fresh losses of between 20 and 27 ringgit.

Technical buying at the lower levels -- by players fearing the market had been oversold or hoping to make a profit if it rose a little on Friday -- helped prices close above lows.

The market was also readying itself for a mild rebound if private crop forecaster Ivan Wong revised his September crop data on Friday, said dealers.

Wong had previously estimated a production of 1.07 million tons and closing stocks of 1.3 million for September.

At the close, the benchmark third-month December futures was down 22 ringgit to 775 ringgit a ton -- still around seven-year lows.

Dealers said support for the contract appeared to be at 750.

The selldown was sparked by concerns over mounting stocks, lesser demand from top buyer India and growing Indonesian competition.

Meanwhile, in Jakarta, an Indonesian trade and industry ministry official said Malaysia and Indonesia, have agreed to cooperate to bolster tumbling prices of the commodity.

But Malaysian officials in Kuala Lumpur denied any talks had been started with Indonesia.

One dealer said one million tons should be disposed from the local market every month until March next year if it wanted to clear current stocks.

"With our very aggressive pricing, we should be able to export 850,000 tons every month now," said Nakul Rastogi, international trading manager at Pacific Interlink Sdn Bhd.

"Plus with a domestic disappearance of 150,000, we're talking about a million tons disposal a month," Rastogi said.

Cargo surveyor Societe Generale de Surveillance Malaysia Sdn Bhd put September exports at 852,982 tons, up from 726,388 in August.

Seasonally lower production between December and March, when output falls to between 900,000 and 750,000 tons a month, could help clear stocks if September's export rates were maintained, dealers said.

But another trader said until a long-term solution was found, the market was expected to fall.

"Any upward is purely and merely a correction of a downtrend until global oil prices improve or stabilize," he said.

"Soybean is not showing any signal of bottoming out yet. So I don't see any reason why palm oil should go up."

Physicals were also active on technical buying.

Oct (south) crude palm oil was offered at 720 ringgit a ton against bids of 710, and trade was done at 730 to 720 ringgit.

Nov (south) saw offers at 760 ringgit a ton against bids of 750, and trade was done at 765 to 755 ringgit.

Refined products maintained midday prices.

Oct RBD palm oil was offered at $217.50 a ton FOB, Nov at $220 and Dec at $225.

There were offers for Oct RBD palm olein at $237.50, Nov at $240 and Dec at $245.

Oct RBD palm stearin was offered at $147.50 and Oct palm fatty acid distillate at $125.