15/03/2011 (Bloomberg) - Palm oil tumbled to the lowest level in more than three months on concern that Japan’s worst earthquake on record may slow global economic recovery, cooling demand for commodities.

The May-delivery contract plunged as much as 2.5 percent to 3,281 ringgit ($1,079) a metric ton before closing at 3,335 ringgit, the lowest price since Nov. 26. Futures shed 8.1 percent last week, the most since the period ended Dec. 5, 2008, according to data compiled by Bloomberg News.

“Commodity prices are lower across the board on concern that shipments to Japan could be affected, softening demand in the near term,” said Ivy Ng, an analyst at CIMB Investment Bank Bhd. “Japan’s economic recovery may temporarily stall, which could affect other Asian counterparts.”

Asian shares slumped, with the Nikkei 225 Stock Average tumbling the most in two years, after the March 11 quake sent crude oil lower and spurred a jump in gold and default risk. The Bank of Japan today injected 7 trillion yen ($86 billion) into the financial system.

Japan’s Economic and Fiscal Policy Minister Kaoru Yosano said the impact of the earthquake and tsunami will hit the economy in its core. The official toll reached 1,597, with 1,481 more missing and 1,683 injured, the National Police Agency said. More than 350,000 people are in emergency shelters.

Improved Supply

Prospects for higher output and inventory in Malaysia, the second-largest producer, also pressured palm oil prices.

Production in February climbed 3.5 percent to 1,094,473 tons, the first gain after three months of declines. Stockpiles rose 4.2 percent to 1,478,793 tons, the country’s palm oil board said March 10. Output in January fell to a four-year low, data from the board show.

World soyabean reserves before the next Northern Hemisphere harvests will be larger than forecast in February because of higher output from Brazil, the U.S. Department of Agriculture said March 10. Palm and soyabean oils are substitutes for food and fuel uses.

Soyabean oil for May delivery shed 1 percent to 55.34 cents a pound in Chicago at 7:06 p.m. in Singapore. Soyabeans for delivery in the same month fell 1 percent to $13.2175 a bushel.

September-delivery palm oil on the Dalian Commodity Exchange fell 2 percent to close at 8,988 yuan ($1,368). Soyabean oil for delivery in the same month shed 1.3 percent to close at 9,880 yuan. CME Group Inc.’s most-active June palm-oil contract, pegged to the Malaysian benchmark price, dropped 2.9 percent to $1,087.25 at 4:51 p.m. Singapore time.