KUALA LUMPUR, Aug 21 — Palm oil’s rout is set to deepen with prices extending declines to less than RM2,000 a metric ton on ample global supplies of edible oils, according to Wayne Gordon, an analyst at UBS AG.
“The overall vegetable oil sector is effectively swimming in supply, or will be swimming in supply by the time we get to the end of the year,” Singapore-based Gordon said in a phone interview. The most-active price on Bursa Malaysia Derivatives fell to RM2,045 yesterday, the lowest level since October 2009. It last traded below RM2,000 in March of that year.
Palm oil tumbled into a bear market last month as favourable weather in the US spurred forecasts for a record crop of soybeans, which can be crushed to provide an alternative oil. Palm also slumped as forecasts for an El Nino weather pattern, which can disrupt supplies, were scaled back, demand for biofuels missed expectations and the ringgit strengthened. Lower prices will help keep global food costs in check, while hurting earnings at growers including Kuala Lumpur-based Sime Darby Bhd.
Palm oil needs to decline by more than soybean oil to attract increased demand from India, the world’s biggest importer, according to Gordon, who’s tracked the commodity since 2009. Further losses in soy oil may weigh on palm, he said.
Palm oil ended 0.9 per cent lower at RM2,049 yesterday, taking losses this year to 23 per cent. Soybeans fell to US$10.35 (RM32.77) a bushel in Chicago, the lowest since September 2010, while soy oil traded at 32.76 cents a pound, the lowest since March 2009. Palm oil’s discount to soyoil was at US$87.48 a ton yesterday, compared with an average of US$244 last year, data compiled by Bloomberg shows. — Bloomberg
