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Palm Oil Demand Declines Ahead of Lunar New Year
calendar27-01-2011 | linkJakarta Globe | Share This Post:

26/01/2011 (Jakarta Globe) - Palm oil declined for a second straight day on expectations that export demand from China, the world’s biggest user of cooking oils, may slow ahead of next week’s Lunar New Year holiday after buyers completed purchases.

The April-delivery contract lost as much as 2.2 percent to 3,622 ringgit ($1,186) per metric ton in Kuala Lumpur and was at 3,670 ringgit at 4:05 p.m. The price is set to decline in January for the first month since June.

Demand from China typically slows as financial markets close for the week-long holiday, which starts on Feb. 2.

Palm oil export data from Malaysia, the world’s second-biggest producer, showed shipments to China fell 6.7 percent in the first 25 days of January compared with the same period the previous month, Societe Generale de Surveillance estimated.

“Exports are not likely to be that strong because of the festive period,” said Ivy Ng, an analyst at CIMB Investment Bank.

“Most people would have bought ahead and now they’re selling. When the price comes off, the demand will resume.”

Prices of palm oil and soybean oil rallied to the highest level in more than two years earlier this month on concern that supplies may tighten as a La Nina event caused drought that threatened harvests in Latin America and flooding that hurt oil-palm harvests in Indonesia and Malaysia.

La Nina weather events can bring unusually dry conditions to parts of South America, including the soybean- and corn-growing regions in Argentina and Brazil, while triggering heavy rainfall in Southeast Asia.

Crude palm oil will remain “fairly firm” in 2011, BNP Paribas SA analyst Michael Greenall said in a report on Wednesday.

“The picture is clouded by below-average fresh-fruit bunch production as a result of the ongoing La Nina, which we believe will be a strong weather event extending beyond” forecasters’ predictions for an end by the first half, Greenall wrote.

Palm oil prices are expected to drop to 3,500 to 3,600 ringgit per ton, while remaining at more than 3,000 ringgit over the first half because of supply concerns, Ng said.