04/10/2011 (The Star) - Crude palm oil (CPO) futures fell to its lowest in almost a year with the benchmark CPO for three-month delivery falling RM60 to RM2,845 a tonne, in tandem with the weaker foreign commodity market due to the gloomy economic outlook.

While the drop in CPO was anticipated due to losses in soybean prices on the Chicago Board of Trade, dealers said basically, speculators had reduced their positions, driven by a weak trend in overseas markets.

“This was weighed down by the gloomy global economic outlook and higher than expected inventory level in the United States.

“The sell-down was expected (but) not at such a drastic pace,” a dealer said, adding that he expected the sentiment to taper off after all the hype was gone.

Another palm oil trader said the sharp sell-down did not quite make sense and it was not justifiable in spite of the softening in soybean trading. However, he said there could be a further decline in palm oil prices on weaker demand for soybean amid increased soybean supplies.

In a report, OSK Research said Malaysia's palm oil shipment for September fell to 1.505 million tonnes compared with 1.620 million tonnes in August.

The Malaysia Palm Oil Board said August exports were higher at 1.689 million tonnes. The month-on-month decline is probably not surprising given the exceptionally strong August shipment.

In fact, the August shipments were the second strongest monthly figure ever.

Historically, Malaysia's monthly palm oil shipments have only exceeded 1.6 million tonnes twice The research house thinks the spread between palm and soyoil at US$188 per tonne would help soften the blow to palm oil's price.

“We are still looking at a steep drop in Sabah's October production which will mean the increase in inventory will be just a blip,” it said.

Plantation stocks on Bursa Malaysia took a beating yesterday, tracking the losses in palm oil.

Kuala Lumpur Kepong was the top loser, tumbling 60 sen to RM20.50, Batu Kawan lost 34 sen to RM14.62, Sime Darby closed 26 sen lower at RM8.18 while IOI Corp fell 19 sen to RM4.46.