Palm Oil Declines to 18-Month Low Amid Worsening Demand Outlook

By Claire Leow

Oct. 3 (Bloomberg) -- Palm oil futures plunged to a 18-month low on concern a proposed $700 million U.S. financial rescue plan won't stimulate economic growth and demand for commodities.

December-delivery palm oil fell 4.3 percent to 2,000 ringgit ($577) a metric ton on the Malaysia Derivatives Exchange. Futures earlier dropped below 2,000 ringgit for a second time this week.

The Reuters/Jefferies CRB Index of 19 commodities has fallen 9.9 percent this week, the largest drop since at least 1956, as a worsening global growth outlook sent prices for crude oil, corn, soybeans, nickel and gold tumbling from peaks reached this year.

``Recent Malaysian export data and a revision in EU biofuels policy amid falling crude oil prices suggest that the pressure on crude palm oil prices is likely to persist,'' Sunaina Dhanuka, an analyst at Macquarie in Kuala Lumpur said today.

On Sept. 11, the EU Industry & Energy Committee lowered its target for 5.75 percent of renewable energy sources in transport fuel by 2010 to 5 percent by 2015, a move that may crimp demand for palm oil for use in biofuels by 2 million tons a year for the next two years, Dhanuka said.

Vegetable oils made from soybeans, corn, rapeseeds and oil palms, used mostly in cooking, often track crude oil prices as they can be used to make alternative fuels. Oil futures in New York have slumped 13 percent this week to $93.29 a barrel.

Malaysia's palm oil exports fell 19 percent in September to 1.2 million tons compared with the previous month, independent surveyor Intertek said today. Indonesia and Malaysia account for 90 percent of the world's palm oil production.

Plantation Stocks

Stocks of plantation companies and edible-oil refiners fell.

Wilmar International Ltd., the world's top palm oil trader which supplies almost half of China's edible oils, dropped 5.1 percent to S$2.4 in Singapore. The stock has lost 12 percent of its value this week.

Indofood Agri Resources Ltd., the Singapore-listed palm oil unit of Indonesia's biggest noodle maker, dropped 6 percent to 72 Singapore cents, extending this week's loss to 12 percent.

Golden Agri Resources Ltd., owner of the world's second- largest oil-palm plantation, fell 7.6 percent to 30.5 cents, extending this week's loss to 16.4 percent.

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