KUALA LUMPUR: Malaysian palm oil futures hit a more than five-month low on Tuesday, their 11th fall in 12 sessions, as a stronger ringgit and bearish fundamentals pulled down markets, and as traders forecast output would rise in the coming months.
The ringgit, the currency palm is traded in, gained 0.7 percent to 4.0320 against the dollar in late trade on Tuesday, making palm oil more expensive for foreign currency holders.
Benchmark palm oil futures for September delivery on the Bursa Malaysia Derivatives Exchange dropped 1.1 percent to 2,374 ringgit ($588) per tonne at the close of trade on Tuesday. It earlier hit 2,370 ringgit, the lowest since Jan. 13.
Palm saw its sharpest weekly decline in 8 months last week, and has lost 9.4 percent so far this month, on track for its worst month since Aug. 2014. Traded volumes stood at 46,135 lots of 25 tonnes each in the evening.”We’re seeing a continued downward trend on a strong ringgit, poor exports and rising production,” said a trader from Kuala Lumpur.
Export demand is expected to taper off after Ramadan, the Muslim religious season that typically sees a higher demand for palm oil for cooking.
Exports decline after the festival period, and demand is seen cooling until the Hindu festival season of Diwali in October.
Output in Malaysia is forecast to climb towards the end of the year, contributing to higher inventory levels and weighing on prices. May production rose nearly 5 percent month-on-month, while exports rose 9.3 percent on Ramadan demand.
Data from cargo surveyors showed palm oil shipments from Malaysia fell in the first 20 days of June, down 8-10 percent from the corresponding period in May.
In competing vegetable oils, the Chicago Board of Trade soyoil contract for July rose 0.4 percent, while the September soybean oil contract on the Dalian Commodity Exchange
