22/07/2011 (Bloomberg) - Palm oil dropped as a rally to the highest level in four weeks may have prompted some investors to sell the commodity amid concerns that output may be rising.

The October-delivery contract fell as much as 0.4 percent to 3,141 ringgit ($1,048) per metric ton on the Malaysia Derivatives Exchange, and ended the morning session little changed at 3,150 ringgit. Futures reached 3,164 ringgit earlier, the highest level since June 23.

“There are concerns of rising production as we reach the peak seasonal production months,” said Ivy Ng, an analyst at CIMB Investment Bank Bhd. July, August and September are the peak production months for the tropical oil.

Futures have lost 17 percent this year on prospects of bigger inventories as better weather resulted in higher output from Indonesia and Malaysia, the biggest producers. Malaysia will produce 18.6 million tons in 2011, up 16 percent from a three-year low last year, Oil World said in a report on July 19. Indonesia’s output this year will rise 8.1 percent to 24 million tons, according to the report.

World production of palm, soybean, cotton, groundnut, sun, rape, palm kernel and coconut oils will rise to a total of 145.7 million tons this year, Oil World said. Global palm oil output will rise 8.5 percent to 49.8 million tons and soybean oil output will gain 5.2 percent to 42.3 million tons, it said.

Indonesia cut the tax rate on crude palm oil exports in August to 15 percent from 20 percent this month, and reduced the base price for calculating the levy on the tropical oil to $1,017 a ton from $1,096 a ton, Deddy Saleh, director general for foreign trade at the Trade Ministry, said yesterday.

Soybeans for delivery in November advanced as much as 0.6 percent to $13.92 per bushel in Chicago. Soybean oil for December climbed as much as 0.6 percent to 58.07 cents per pound.

Palm oil for May delivery on the Dalian Commodity Exchange gained as much as 0.7 percent to 9,276 yuan ($1,438) a ton. Soybean oil for delivery in the same month fell as much as 0.4 percent to 10,324 yuan.