05/08/2011 (Bloomberg) - Palm oil dropped the most in more than a week on speculation that favorable weather in the U.S. may boost soybean yields, lifting global supplies of vegetable oils for use in food and fuel.

The October-delivery contract fell 1.1 percent to 3,101 ringgit ($1,037) per metric ton on the Malaysia Derivatives Exchange, the biggest loss since July 25. Futures have lost 18 percent this year.

Some soybean fields from Colorado to Iowa may get as much as 4 inches (10 centimeters) of rain in the next three days with more precipitation and cooler temperatures developing after Aug. 8, Dave Tolleris, the president of WXRisk.com in Richmond, Virginia, said in a report yesterday.

“There’s less concern of supply coming in below expectations” for soybeans as the weather improves, Ivy Ng, an analyst at CIMB Investment Bank Bhd., said by phone from Kuala Lumpur. Palm oil is “down because of the grain market.”

Corn dropped for a second day in Chicago on concern that the global economic growth will slow amid lower spending by U.S. consumers and companies, reducing demand for the grain that’s used in food, feed and biofuels. Wheat and soybeans also fell.

Palm oil is lower “due to the global concerns,” Rajesh Modi, a trader at Singapore-based Sprint Exim Pte., said by phone. The tropical oil is expected to trade between 3,050 ringgit and 3,200 ringgit until September, he said.

“Demand is there for palm oil in the near term due to the price differential with soybean oil,” Modi said. “Production is high, but it is offset by the demand.”

Rising Output
Soybean oil’s premium over palm oil widened to $216.17 a ton from $201.34 yesterday. Output of palm oil in Malaysia, the second-largest producer after Indonesia, expanded 0.7 percent to 1.75 million tons in June from May, the highest in 20 months.

“The stock levels will remain roughly where they are in terms of palm,” Ng said. “There’s plenty of it.”

Reserves in Malaysia stood at 2.05 million tons in June, after reaching an all-time high of 2.27 million tons in November 2008, according to the Malaysian Palm Oil Board. Data on output, inventory and exports for July are set for release on Aug. 10.

Soybeans for delivery in November lost as much as 0.8 percent to $13.6225 per bushel in Chicago and last traded at $13.6275. Soybean oil for December delivery dropped as much as 0.4 percent to 56.83 cents per pound.

Palm oil for May delivery fell 1 percent to close at 9,142 yuan ($1,420) a ton on the Dalian Commodity Exchange and soybean oil for delivery in the same month shed 0.8 percent to settle at 10,278 yuan a ton.