Palm Oil Drops to Nine-Month Low Amid Global Commodities Slump

By Claire Leow

Aug. 5 (Bloomberg) -- Palm oil in Malaysia dropped as much as 4.8 percent to the lowest in more than nine months, mirroring a worldwide commodities sell-off, on concern that demand for the vegetable oil may decline amid slowing global growth.

Palm and soybean oils traded in China, the largest market for cooking oils, both dropped by the day's limit of 5 percent. The two are substitutes and often follow crude oil because they can be used to produce biofuels. Crude oil closed at $121.41 a barrel yesterday, the lowest in three months.

``Soybean prices will be the main determinant of palm oil prices,'' Luke Chandler, an analyst at Rabobank International in Sydney, said today in a report.

Palm oil in Malaysia, the global benchmark, dropped as low as 2,750 ringgit ($841) a metric ton, the lowest since Oct. 26. The most-active contract traded at 2,772 ringgit at 11:34 a.m.

Prices were pulled lower by a slump in the commodities complex. Plunging prices for cocoa, natural gas and sugar sent the Reuters/Jefferies CRB Index of 19 commodities to its biggest one-day drop since March. Copper futures in Shanghai today fell to the lowest in more than six months.

Soybeans traded on the Chicago Board of Trade have lost as much as 9.5 percent in four days to $12.72 a pound at 10:47 a.m. Singapore time in electronic after hours trading. Soybean oil has declined 8.8 percent in past three days to 54.28 cents a pound.

Vegetable oils traded on China's Dalian Commodity Exchange fell by the daily 5 percent limit. Soybean oil dropped 468 yuan to 8,916 yuan ($1,301) a ton, the first time since Nov. 6 it has traded below 9,000 yuan. Palm oil dropped 410 yuan to 7,814 yuan, the lowest since it started trading last October.

To contact the reporters for this story: Claire Leow in Singapore at cleow@bloomberg.net