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Asia Palm Oil: Prices set to drop further

KUALA LUMPUR: Asian palm oil prices were expected to fall further this week due to weak demand, regional traders said.

A strengthening Indonesian rupiah currency would also weigh on Indonesian prices, they said.

Sagging exports and weak soyoil futures had dragged Malaysian palm oil prices to a six-month low, and traders see little respite in the near term. Palm oil competes with soyoil for export demand.

Malaysia's benchmark third-position palm oil futures contract closed on Friday at 1,063 ringgit a tonne, down from 1,122 a week earlier.

Traders said prices could be heading for 1,000 ringgit amid concerns over dwindling exports.

"We are going towards 1,000 ringgit, fundamentals and charts are showing that direction," said S.K. Choo, marketing manager at Josovina Sdn Bhd.

He said the market could even test its previous low of 963 ringgit set on July 30, 1999.

Malaysian palm oil exports for January stood at 638,601 tonnes, down from 949,873 tonnes in December, figures from cargo surveyor Societe Generale de Surveillance showed.

Traders said the market was especially concerned about demand from India.

Exports to India have slowed since New Delhi raised import duty on refined edible oils to 27.5 percent from 16.5 percent in late December. India imported 129,021 tonnes of Malaysian palm oil in January, down from 234,064 tonnes in December.

India was the biggest buyer of Malaysian palm oil in 1999, taking about 2.3 million tonnes or a quarter of Malaysia's total exports. A sharp drop in prices on the back of oversupply had prompted strong Indian buying last year.

SGS will release exports data for the first half of February on Tuesday.

The market is also awaiting official Malaysian palm oil data for January from the Palm Oil Registration and Licensing Authority due on Friday.

Indonesian palm olein prices were likely to fall because of anticipation the rupiah would rebound, traders said.

"It's hard to say how the market's going to behave. If the rupiah strengthens, then you can expect to see olein prices fall," said a trader in Jakarta.

Olein finished last week at 2,700 rupiah/kg in Jakarta.

Crude palm oil was quoted at 2,233 and 2,311 rupiah/kg, based on Tuesday's weekly tender by the state marketing centre.

The rupiah strengthened to 7,240/7,290 to the dollar against 7,275/7,305 in late trade on Friday, helped by reports President Abdurrahman Wahid had removed General Wiranto from the cabinet. -Reuters