10/06/2011 (Palm Oil HQ) - Crude palm oil futures on Malaysia’s derivatives exchange tumbled sharply Thursday following heavy selling due to lower soyoil and lingering concerns about rising stock levels.

Benchmark August CPO on the Bursa Malaysia Derivatives ended 0.9% lower at MYR3,287 a metric ton.

Prices fell to MYR3,213/ton, the lowest level since May 9, after CPO breached technical support at MYR3,290/ton, triggering a series of stop-loss orders, said a commodities broker at a Kuala Lumpur-based investment bank.

Still, prices may recover as June 1-10 export demand is expected to rise 33% from a month ago to 430,000 tons, said a trading executive at a Kuala Lumpur-based vegetable oils exporting firm.

Cargo surveyors Intertek Agri Services and SGS (Malaysia) Bhd. are scheduled to issue export data Friday. The two estimated May 1-10 exports at 323,655 tons and 323,664 tons, respectively.

The implementation of a mandatory biodiesel blend in Malaysia from June 1 and concerns over the condition of the North American crop will outweigh concerns “over a bumper oil palm crop for now,” and underpin prices in the near term, OSK Research said in a note.

“Although initial demand for palm oil arising from the mandatory blending will be small, the very existence of the mandatory blend will ensure that palm oil’s price does not collapse should supply get excessive,” it said.

Malaysia’s CPO output may rise to 18 million tons in 2011 after two consecutive years of declines, analysts and planters said. Last year, CPO output reached 17 million tons, compared with 17.6 million tons in 2009.

State-linked Malaysian Palm Oil Board is scheduled to issue May output, stock and export data Friday.

Rupiah-denominated palm oil for August on the Indonesia Commodity & Derivatives Exchange was trading 0.7% higher at IDR9530 a kilogram.

In the physical market, several trades were done, with July shipment traded at $1,182.50/ton, October, November, December at $1,37.50 and January, February, March at $1,137.50, free on board Malaysian ports, said a Singapore-based physical market broker.

Cash CPO for prompt shipment was unchanged at MYR3,360/ton.

Trade on the BMD reached 25,105 lots, compared with 19,756 lots Wednesday. One lot equals 25 tons.

Open interest reached 110,130 lots, compared with 112,542 lots Wednesday.