17/05/2010 (Bloomberg) - Palm oil dropped to the lowest level in more than three months on concern that the global economic recovery may be derailed by European austerity measures, spurring a slump in crude oil and soybean oil.

The July-delivery contract lost as much as 1.6 percent to 2,417 ringgit ($748) a metric ton on the Malaysia Derivatives Exchange, the lowest intraday level since Jan. 29. The contract was at 2,431 ringgit at the 12:30 p.m. break in Kuala Lumpur.

“We have to watch everything” as market weakness is deterring investors, said Jessie Fan, a trader at TA Futures Sdn. “The current range will probably be 2,400 to 2,500” ringgit a ton, she said.

Shares in Asia declined for a second day, with European finance ministers set to meet in Brussels today to address the region’s economic crisis. Crude oil futures slumped for a fifth straight day.

Soybeans for July delivery in Chicago, the benchmark for the oilseed, fell for a fourth day, dropping as much as 1.1 percent to $9.435 a bushel, the lowest price since April 9. Soybean oil dropped for a third day to 37.22 cents a pound. Soybeans are crushed for livestock feed, and the oil is used for cooking and biofuels.

A trigger for a further fall in palm oil prices may be a drop by soybeans in Chicago to less than $9.40 a bushel, Scott Briggs, agricultural commodities strategist at Australia & New Zealand Banking Group Ltd., said on May 14.

Soybean Oil Premium
The premium of soybean oil over palm oil was last at $71.22 a ton. The premium has averaged $129.48 over the past 12 months, according to Bloomberg data. The spread has narrowed as the Malaysian ringgit strengthened 6 percent this year against the dollar, making it the best performer of 10 Asian currencies tracked by Bloomberg.

Palm oil exports from Malaysia, the second-largest producer after Indonesia, rose 23 percent to 591,887 tons in the first 15 days of May compared with the first 15 days of April, market surveyor Intertek said on May 15.

Exports to China, the largest consumer of edible oils, rose 38 percent to 161,700 tons in the period, and exports to India and the subcontinent more than doubled to 86,230 tons, the data showed. Shipments to the European Union, the second-largest destination, dropped to 100,370 tons from 120,200 tons.

Palm oil for January delivery in China, the largest consumer, lost 1.9 percent to 6,528 yuan ($956) a ton on the Dalian Commodity Exchange by the 11:30 a.m. trading break and Dalian soybean oil declined 1.9 percent to 7,494 yuan a ton.

Crude oil dropped to less than $70 a barrel on concerns that fuel demand may fall, and the commodity is headed for its longest losing streak in five weeks. Last week U.S. stockpiles climbed for the 14th time in 15 weeks, signaling weak demand.

Crude oil has lost 18 percent this month, and traded at $70.28 a barrel at 12:33 p.m. Singapore time.