MARKET DEVELOPMENT
Palm Oil Drops Most in Seven Weeks After Entering Bull Market
Palm Oil Drops Most in Seven Weeks After Entering Bull Market
05/11/2013 (Bloomberg) - Palm oil declined the most in seven weeks as some investors sold on concern that a rally to a one-year high and into a bull market may be overdone.
The contract for January delivery lost as much as 1.7 percent to 2,583 ringgit ($815) a metric ton on the Bursa Malaysia Derivatives, the steepest drop for futures since Sept. 17. Palm was at 2,584 ringgit at 4:10 p.m. in Kuala Lumpur. Prices rose to 2,628 ringgit on Nov. 1, the highest close since September 2012 and 21 percent more than the 2,167 settlement on July 29, meeting the common definition of a bull market.
Prices rallied 7.5 percent last week for a fourth weekly gain on speculation that output in top producers Indonesia and Malaysia is less than analysts expected and that the start of the monsoon season this month would further curb supply. The 14-day relative strength index for palm was 70.5. Some traders see readings above 70 as a sign a drop in prices is imminent.
“Today’s decline is just a pullback of an uptrend,” said Benny Lee, a market strategist at Jupiter Securities Sdn. in Kuala Lumpur. “This pullback should be temporary as the uptrend is still intact.”
Several major plantation companies in Indonesia reported that output unexpectedly declined 7 percent to 10 percent in the first 10 months, Derom Bangun, chairman of the country’s palm oil board, said last week. Some regions had too much rain during the dry season disrupting pollination and some trees suffered from a five-year low in their production cycle, he said.
Soybean oil for December delivery advanced 0.7 percent to 41.86 cents a pound on the Chicago Board of Trade, while soybeans for January climbed 0.4 percent to $12.57 a bushel.
Refined palm oil for May delivery lost 0.9 percent to close at 6,318 yuan ($1,036) a ton on the Dalian Commodity Exchange and soybean oil gained 0.3 percent to end at 7,326 yuan.
The contract for January delivery lost as much as 1.7 percent to 2,583 ringgit ($815) a metric ton on the Bursa Malaysia Derivatives, the steepest drop for futures since Sept. 17. Palm was at 2,584 ringgit at 4:10 p.m. in Kuala Lumpur. Prices rose to 2,628 ringgit on Nov. 1, the highest close since September 2012 and 21 percent more than the 2,167 settlement on July 29, meeting the common definition of a bull market.
Prices rallied 7.5 percent last week for a fourth weekly gain on speculation that output in top producers Indonesia and Malaysia is less than analysts expected and that the start of the monsoon season this month would further curb supply. The 14-day relative strength index for palm was 70.5. Some traders see readings above 70 as a sign a drop in prices is imminent.
“Today’s decline is just a pullback of an uptrend,” said Benny Lee, a market strategist at Jupiter Securities Sdn. in Kuala Lumpur. “This pullback should be temporary as the uptrend is still intact.”
Several major plantation companies in Indonesia reported that output unexpectedly declined 7 percent to 10 percent in the first 10 months, Derom Bangun, chairman of the country’s palm oil board, said last week. Some regions had too much rain during the dry season disrupting pollination and some trees suffered from a five-year low in their production cycle, he said.
Soybean oil for December delivery advanced 0.7 percent to 41.86 cents a pound on the Chicago Board of Trade, while soybeans for January climbed 0.4 percent to $12.57 a bushel.
Refined palm oil for May delivery lost 0.9 percent to close at 6,318 yuan ($1,036) a ton on the Dalian Commodity Exchange and soybean oil gained 0.3 percent to end at 7,326 yuan.