03/05/2010 (Bloomberg) - Palm oil, little changed, may decline amid concerns that demand for the edible oil may weaken.

July-delivery palm oil traded at 2,557 ringgit ($767) a metric ton at the 12:30 p.m. trading break on the Malaysia Derivatives Exchange. The contract rose 0.7 percent last week.

“Generally we have seen a weaker outlook for edible oils,” said Scott Briggs, agricultural commodities strategist at Australia & New Zealand Banking Group Ltd., noting high soybean stocks. “My view is that it’s down from here over the medium term.”

Palm oil futures dropped 1.7 percent in March as the South American harvest of soybeans, which produce rival soybean oil, got under way. The premium of soybean oil over palm oil is near the lowest since November 2007, potentially reducing demand for the cheaper product.

Soybean oil for July delivery in Chicago dropped for a second day, losing 0.2 percent to 38.85 cents a pound at 12:18 p.m. Singapore time. Its premium over palm oil was $58.63 a ton, less than half the average over the past 12 months, according to Bloomberg data. On April 30, the premium plunged to $56.47 a ton, the lowest since Nov. 1, 2007.

A stronger ringgit has helped narrow the spread between the two rival oils. The currency rose 2.2 percent in April, extending its advance to 7.3 percent this year.

Moreover, stockpiles of palm oil at ports in China, the biggest user, are about 500,000 tons, which is “ample” to curb prices, the China National Grain & Oils Information Center said last week.

Declining Exports
Malaysia’s palm oil exports fell to 1.18 million tons in April, 13 percent lower than in March, with shipments to the Americas and the Indian subcontinent leading the decline, surveyor Intertek said on April 30.

Sales to the Americas plunged 46 percent to 88,074 tons as alternative supplies increased with the South American soybean harvest. Shipments to China fell 12 percent to 324,657 tons and exports to India and the subcontinent plunged 42 percent to 173,760 tons.

In China, the Dalian Commodity Exchange was closed to mark the Labor Day holiday. Trading resumes tomorrow.

China’s soybean imports between April and June may reach a record 14 million tons, the China National Grain & Oils Information Center said last week. Inbound shipments of palm oil may total 318,000 tons in April, it said.

Crude oil lost 0.2 percent to $85.97 a barrel, snapping a 4.5 percent, three-day rally. Palm oil has tracked crude’s weekly movements for 12 weeks as confidence in an economic recovery fueled optimism that energy demand will rise, boosting the need for biofuels made from vegetable oils.

Improving weather in the current quarter may contribute to a “lackluster performance” for palm oil prices in the near- term, Margarett Go, a plantation analyst at Citigroup Global Markets Inc. in Jakarta, said in a note to clients.