15/04/2011 (Bloomberg) - Palm oil dropped for a third day, the worst losing run this month, on speculation increased output from Indonesia and Malaysia, the top growers, will boost supply.

The June-delivery contract lost 2 percent to 3,282 ringgit ($1,084) per metric ton, the most since March 22. The commodity fell 0.7 percent yesterday and 1.3 percent on April 12.

Futures have lost 17 percent since reaching a 35-month high of 3,967 ringgit Feb. 10 as a fading La Nina improved the outlook for production. The phenomenon caused excessive rain in parts of Southeast Asia, disrupting harvesting and affected yields. Global palm oil output this year will be at least 3 million tons higher than 2010, Dorab Mistry, director of Godrej International Ltd., said April 12.

“Palm oil supply pressure is there in the market,” Chandran Sinnasamy, head of trading at LT International Futures (M) Sdn, said by phone in Kuala Lumpur. “If there are no weather issues and no further cuts in soybean acreage, I think palm oil prices will follow supply pressure.”

La Nina will start to weaken in the equatorial Pacific in April, normalizing weather in Malaysia and bringing levels of rain that should favor oil palms, the country’s Meteorological Department said in an e-mailed report yesterday.

The U.S. Department of Agriculture said on March 31 the country’s farmers may cut soybean planting by 1 percent from last year while boosting corn and wheat acreage. Palm and soybean oils are substitutes in food and fuel uses.

Expanding Output
Indonesian palm oil production this year may increase by 2.5 million tons to 25 million tons, said Mistry, who has traded palm oil for more than three decades. An earlier estimate of 17.3 million tons for Malaysian output may be “too low,” he said, without giving a new forecast.

Malaysia’s output may expand to 17.6 million tons this year from 17 million in 2010, Plantation Industries and Commodities Minister Bernard Dompok said on March 8. Last month, the nation’s production surged 29.4 percent to 1.42 million tons compared with February, the steepest monthly gain since June 1999, according to data from the Malaysian Palm Oil Board.

“Demand is not coming in from India” as they have stockpiles of local oils, such as mustard oil, which is currently about the same price as palm oil, Rajesh Modi, a trader at Singapore-based Sprint Exim Pte, said by phone today. Demand will pick up from May onwards, when inventories will need to be replenished, Modi said.

Indian Oilseeds
India’s output of oilseeds such as soybeans, peanuts and mustard may rise 12 percent to 27.85 million tons in the year to June 30, from 24.9 million tons in the prior period, the farm ministry said on Feb. 9.

Soybeans for July delivery fell as much as 0.8 percent to $13.345 per bushel in Chicago and were at $13.355 at 6:13 p.m. in Singapore. Soybean oil for the same month shed as much as 0.8 percent to 57.54 cents per pound.

January-delivery palm oil on the Dalian Commodity Exchange lost 1.3 percent to close at 9,164 yuan ($1,403) a ton. Soybean oil for delivery in the same month fell 1.5 percent to 10,252 yuan per ton at the close.

CME Group Inc.’s most-active June palm-oil contract, pegged to the Malaysian benchmark, slumped 4.6 percent to $1,109 a ton at 4:04 p.m. Singapore time.