08/06/2011 (Bloomberg) - Palm oil dropped to the lowest level in more than two weeks, tracking declines in soybeans as farmers in the U.S. accelerated oilseed planting after the weather improved.

August-delivery palm oil lost as much as 1.3 percent to 3,343 ringgit ($1,110) a metric ton on the Malaysia Derivatives Exchange, the lowest since May 19. Futures have climbed 37 percent in the past year.

Warmer, drier weather in most of the U.S. last week allowed farmers to accelerate delayed corn and soybean planting and gave a boost to crops stunted by cold, wet conditions earlier in May, the government said yesterday. Soybeans fell 2.2 percent yesterday, the most in more than four weeks.

Palm oil declined on “the recovery of weather conditions in the U.S. and the week-on-week increase in soybean planting,” Vimala Reddy, an analyst at Karvy Comtrade Ltd., said from the Indian city of Hyderabad. “Any increase in the production of soybean would increase the crushing and increase soybean oil supplies, which is a substitute for palm oil, so that would have an adverse impact on palm oil prices.”

About 68 percent of the soybean crop was planted as of June 5, up from 51 percent a week earlier, the U.S. Department of Agriculture said yesterday in a report. Still, this was slower compared with 83 percent planted a year ago and 82 percent five- year average. Approximately 44 percent of the plants had emerged, compared with 27 percent a week earlier and the five- year average of 61 percent. Soybeans can be planted later than other crops with less impact on yield.

Rain Forecast
Some muddy fields dried out enough to support planting machinery, said Drew Lerner, the president of World Weather Inc. Over the next two weeks, crops will get frequent rains that will aid germination, Lerner said.

“Even though the pace is a bit slow compared with the five-year average, I think there’s still a chance for it to improve later,” Ryan Long, vice president of futures & options at OSK Investment Bank Bhd., said by phone from Kuala Lumpur. “The concern is not too big at the moment.”

Palm oil prices are also under pressure on expectations of higher output from Indonesia and Malaysia, the two biggest growers, in the second half of the year, Reddy said.

Palm oil stockpiles in Malaysia climbed to the highest level in six months in April after production increased on favorable weather, the Malaysian Palm Oil Board said May 10. The board is due to report output, inventory and export data for May on June 10.

July-delivery soybeans gained as much as 0.5 percent to $13.90 a bushel in Chicago, while soybean oil for the same month rose as much as 0.5 percent to 58.31 cents per pound.

January-delivery palm oil on the Dalian Commodity Exchange shed as much as 1.6 percent to 9,316 yuan ($1,438) a ton and was at 9,320 yuan at 11:30 a.m. Soybean oil for delivery in the same month lost as much as 1.4 percent to 10,382 yuan a ton.

CME Group Inc.’s most-active September palm-oil contract, pegged to the Malaysian benchmark, fell 0.7 percent to $1,109 per ton.