26.11.2018 (The Edge Markets MY) - JAKARTA (Nov 26): Malaysian palm oil futures suffered their biggest fall in more than 21 months on Monday after Indonesia, the world's top palm oil producer, announced measures to increase shipments.

The sharp drop in palm oil prices in late trading was in direct response to the announcement that Indonesia will help palm oil exporters by reducing its export levy to zero from US$50 a tonne previously, traders said.

Until now the Indonesian levy had helped to make Malaysian palm oil more competitive. Its abolition could put Indonesian producers in a more advantageous situation because their costs are lower than their Malay counterparts, one Kuala Lumpur-based trader said.

At Monday's close, the benchmark palm oil contract for February delivery on the Bursa Malaysia Derivatives Exchange was down 3.9% at RM1,965 (US$469.42) a tonne. That was its biggest one-day dip since Feb 16 last year.

Traded volumes stood at 53,531 lots of 25 tonnes each.

However, Malaysia's announcement on Monday of revisions to its biodiesel content rules are likely be supportive for palm oil in the intermediate and long-term, a second Kuala Lumpur trader said.

The so-called B10 biodiesel programme will raise the minimum bio-content that local producers must put in biodiesel to be used in transport to 10% from 7% at present, potentially boosting demand for palm oil as a feedstock.

Monday's losses bring the Malaysian palm oil benchmark near to a three-year low of RM1,949, hit last week amid high inventories, rising production and sluggish demand.

Other traders said Monday's declines were the culmination of multiple factors including weaker crude oil prices.

"There are still plenty of stocks, less demand and good production," a trader said, when asked about the continued slide on Monday afternoon. "I think the market will correct further."

Exports of Malaysian palm oil products over Nov 1-25 fell 2.6% to 1,041,433 tonnes from 1,068,662 tonnes shipped over Oct 1-25, cargo surveyor Intertek Testing Services said on Sunday. Exports in October fell 14.1%.

Palm oil production and exports from Indonesia, the world's top palm oil producer, fell in October from the previous month after the harvest season's peak while stocks declined, according to the median results of a Reuters survey.

Traders are looking to the G20 meeting in Buenos Aires this week for clues on how the trade feud between the United States and China will affect markets in 2019.

Palm oil prices are affected by movements of other edible oils that compete for a share in the global market.

In related oils, the Chicago soybean oil contract for December was down 0.7%, while the January soybean oil contract on the Dalian Commodity Exchange gained 0.4%.

The Dalian January palm oil contract was down 0.4%.

Crude oil prices, which also affect the palm oil market, clawed back some losses from close to an 8% plunge in the previous session, but Brent failed to hold above US$60 a barrel amid generally weak financial markets.

Palm, soy and crude oil prices at 1040 GMT

Contract	Month	Last	Change	Low	High	Volume
MY PALM OIL	DEC8	1827	-39	1827	1895	435
MY PALM OIL	JAN9	1889	-89	1889	1988	7227
MY PALM OIL	FEB9	1965	-79	1965	2055	23009
CHINA PALM OLEIN	JAN9	4206	-16	4172	4230	295914
CHINA SOYOIL	JAN9	5428	24	5370	5444	252378
CBOT SOY OIL	DEC8	27.45	-0.2	27.41	27.76	8797
INDIA PALM OIL	NOV8	499.8	-8.5	497	512.6	615
INDIA SOYOIL	DEC8	720.2	-12.95	716.5	730	12040
NYMEX CRUDE	JAN9	51.07	0.65	50.1	51.42	158884

Palm oil prices in Malaysian ringgit per tonne
CBOT soy oil in US cents per pound
Dalian soy oil and RBD palm olein in Chinese yuan per tonne
India soy oil in Indian rupee per 10 kg
Crude in US dollars per barrel

(US$1 = RM4.1860)
(US$1 = 70.6825 Indian rupees)
(US$1 = 6.9371 Chinese yuan)