Palm oil futures decline 1.3 percent

Palm oil futures decline 1.3 percent

Bloomberg, Kuala Lumpur

Palm oil futures in Malaysia, the world's biggest exporter of the edible oil, fell as prices of rival soybeans had the largest decline in three months on Friday after demand from U.S. processors fell unexpectedly in December.

"A sharp drop in soybean price in the U.S. is prompting the decline in palm oil," said Ferdi Gunawan, a marketing officer at PT Salim Oil Grains, a Jakarta-based palm oil producer. "The two commodities substitute each other."

Palm oil futures on the Malaysian Derivatives Exchange for March delivery fell 18 ringgit, or 1.4 percent, to 1,311 ringgit a ton (US$345) at 3:17 p.m. in Kuala Lumpur. Soybeans fell 17 cents, or 3.2 percent, to $5.195 a bushel on the Chicago Board of Trade on Friday, the biggest one-day percentage decline since Oct. 12 and the lowest closing price since Nov. 9.

U.S. processors crushed 143.4 million bushels of soybeans into feed and oil last month, down 0.7 percent from November, the National Oilseed Processors Association said last week in a report.

The decline in palm oil futures may stall as buying in Asia will increase ahead of the Chinese New Year holiday starting Feb. 9, said Boyke Setiawan, a marketing analyst at state-owned PT Perkebunan Nusantara VII. The company owns oil palm plantations and processing plants in Indonesia.

"The need for edible oil will increase in the coming days," said Perkebunan Nusantara's Setiawan.

Four out of seven traders and producers polled by Bloomberg in Kuala Lumpur and Jakarta on Friday and Monday said they plan to buy palm oil this week, while three recommended holding the commodity.

Palm oil futures on the Malaysian Derivatives Exchange last week fell 1.6 percent to 1,329 ringgit a metric ton.

Malaysia and Indonesia produce about 80 percent of the world's palm oil. Palm oil, used to make cooking oil and chemicals used in soaps and detergents, is soybean oil's biggest rival in the vegetable oil market.