Palm Oil Plunges by the Most in More Than 12 Months in Malaysia

By Feiwen Rong

Aug. 15 (Bloomberg) -- Palm oil futures in Malaysia, the global benchmark for the commodity, plunged by the most in at least a year on lower crude oil and commodity prices, and speculation that demand may decline.

Palm oil for October delivery, the most-actively traded contract on the Malaysia Derivatives Exchange, fell by as much as 8.7 percent to 2,392 ringgit ($715) a metric ton, the lowest since May 9, 2007. The contract was at 2,446 ringgit at 4:01 p.m. local time. Shares in palm oil companies also declined.

The vegetable oil, used in food and biofuels, often tracks the performance of crude, which has slumped 23 percent from a record $147.27 a barrel on July 11. Palm oil prices are likely to be ``subdued,'' Wilmar International Ltd., the world's biggest palm oil trader, said yesterday when reporting earnings.

``The recent crude palm oil price correction is largely sentiment-driven, triggered by the crude oil price decline,'' Fordyanto Widjaja, an analyst at Morgan Stanley Asia Pte., wrote in a note today from Singapore.

Wilmar stock in Singapore was the biggest decliner on the Straits Times Index, falling as much as 5.2 percent to S$3.98. IOI, Malaysia's second-largest palm oil grower, declined as much as 3.3 percent, and PT Astra Agro Lestari, Indonesia's biggest publicly traded agriculture company, dropped 7.1 percent.

Vegetable oils traded on China's Dalian Commodity Exchange dropped. Soybean oil fell 346 yuan, or 3.9 percent, to close at 8,640 yuan ($1,257) a ton, after earlier losing as much as 5 percent, the daily limit. Palm oil fell 324 yuan, or 4.2 percent, to close at 7,488 yuan a ton.

Gold today plunged below $800 an ounce, silver dropped as much as 12 percent and crude oil, corn and copper slumped as a rebound in the dollar cut the appeal of commodities after a six- year boom. Gold fell to $788.65 an ounce, its lowest since Dec. 17.

``Prices have made a peak,'' said investor Marc Faber, 62, who publishes the Gloom, Boom & Doom Report. ``Whether that is a final peak or an intermediate peak followed by higher prices, we don't know yet.''

To contact the reporter for this story: Feiwen Rong in Singapore at Frong2@bloomberg.net