By Claire Leow and Yoga Rusmana
Dec. 5 (Bloomberg) -- Palm oil in Malaysia dropped for a sixth day as record stockpiles and the world economic slowdown crimps orders for its use in food and fuel applications.
Palm oil futures have fallen 68 percent from a record in March as the deepening credit crisis and global recession fears cut demand for raw materials. Malaysian inventories reached an all-time high of 2.09 million tons in October, the nation’s palm oil board said Nov. 10.
“The fundamentals for vegetable oils must include the macro-economic situation,” Dorab Mistry, a director at Godrej International Ltd., said yesterday.
Palm oil for February delivery traded in Malaysia fell as much as 4.5 percent to 1,396 ringgit ($384) a metric ton, after dropping the most in a month yesterday as crude plunged. Futures ended the morning session 1.5 percent lower at 1,440 ringgit.
Palm oil could come under pressure over the next 10 to 12 weeks, Mistry said, as a near-record rapeseed harvest in India, the second largest consumer of vegetable oils, would reduce Indian demand for palm oil, he said.
Moreover, “soybean oil prices will come under great pressure as stocks are high,” which will damp prices for palm oil, its substitute, he said.
Soybean oil in Chicago for January delivery dropped for a fifth day in after-hours trading, losing as much as 1.2 percent to 29.15 cents as crude oil slumped. It traded at 29.20 cents a pound by 12:45 p.m. Singapore time.
Vegetable oils often track crude oil as they can be used as bio-fuels for alternative energy. China, EU countries, India and Pakistan are the biggest consumers of palm oil.
Crude oil dropped 6.7 percent in New York yesterday, and traded at $43.87 a barrel by 11:38 a.m. Singapore time.
Palm oil is the third most used feedstock for bio-fuels, after rapeseed oil and soybean oil.
To contact the reporters on this story: Yoga Rusmana in Jakarta at yrusmana@bloomberg.net; Claire Leow in Singapore at at cleow@bloomberg.net;
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