Palm Oil Drops for Second Day on Bearish Outlook, Soybean Oil

By Feiwen Rong

Aug. 26 (Bloomberg) -- Palm oil futures in Malaysia tumbled for the second day as a drop in rival soybean oil and a bearish outlook from a leading analyst unsettled the market.

Palm oil, the world's most consumed vegetable oil, declined after Dorab Mistry, director at Godrej International Ltd., said yesterday that prices must fall to 2,200 ringgit ($653) a metric ton in the next few weeks for demand to rebound.

The edible oil slumped as ``someone with that caliber turned bearish'' and ``soybean oil also fell,'' Kan Heen Sing, trader at HLG Futures Sdn., said today by phone from Kuala Lumpur.

Palm oil for November delivery fell as much as 5.2 percent to 2,465 ringgit a ton and was at 2,485 ringgit in Kuala Lumpur at 12:33 p.m. local time. Prices tumbled 4.2 percent yesterday, the most since Aug. 15. Soybean oil, which can be used as cooking oil and in biofuel, fell 2.2 percent to 54.05 cents per pound.

Futures fell to a 15-month low last week as supplies from Malaysia and Indonesia, the biggest producers, outpaced demand for food, and as weaker crude oil lowered its attraction as a biofuel. Global demand for vegetable oils may expand 6.5 million tons in the year from October, less than the 6.8 million ton increase in supplies, Mistry said.

The benchmark futures at 2,500 ringgit is an ``important psychological level,'' Kan at HLG said. ``If that level gets broken, we might see prices decline further to find some support around 2,350 ringgit.''

To contact the reporter on this story: Feiwen Rong in Singapore at frong2@bloomberg.net