11/06/2010 (Bloomberg) - Palm oil futures fell a fifth day, the longest losing streak in five months, as seasonal supply concerns are compounded by record soybean harvests.

The commodity for August delivery shed 1 percent to 2,386 ringgit ($728) a ton on the Malaysia Derivatives Exchange, down 3.6 percent for the week. The most-active contract hasn’t fallen for as long a period since a five-day drop in January, when the price fell 4.6 percent on reports of record South American crop.

Palm oil production in Malaysia advanced 6.1 percent in May to 1.39 million tons, meeting demand as exports jumped 6 percent to 1.36 million tons, according to the Malaysian Palm Oil Board. Stockpiles fell 3.7 percent to 1.56 million tons.

“There are no supply shocks in sight,” said Bernard Ching, an analyst at ECM Libra Capital Sdn. “Despite the increases in exports, production has sufficed in meeting this demand.”

Oil palms, grown mainly in Indonesia and Malaysia, seasonally recover from tree stress and start producing more in the second half. Palm oil stockpiles in Malaysia, the second largest producer, should rise from June, ending a five-month decline as output climbs, AmResearch Sdn. said in a report.

Brazilian farmers will harvest 68.7 million tons of soybeans this year, more than the 67.9 million tons estimated on May 6, the Agriculture Ministry’s crop-forecasting agency Conab said this week. The forecast is 20 percent above last year’s production of 57.2 million tons.

Palm oil “prices are expected to be capped by a bumper soybean harvest from South America,” AmResearch said.

Support
The commodity may find support between 2,392 ringgit and 2,400 ringgit a ton, as “the market is still bearish,” said Ahmad Lokman, a trader at OSK Investment Bank Bhd. The Malaysian data is “quite neutral” providing “just enough to support the market from falling further,” he added.

“The weakness in the soy complex and the narrow price discount between crude palm oil and soy oil will cap prices” for the tropical oil, said Sunaina Dhanuka, an analyst at Macquarie Capital Securities (Malaysia) Sdn.

Soybeans traded in Chicago dropped a second day, losing 0.2 percent to $8.9275 a bushel. Chicago soybean oil was little changed at 36.80 cents a pound, making it $80.40 a ton more expensive than palm oil, 36 percent lower than the 12-month average of $125.85, according to Bloomberg data.

CME Group Inc.’s September-delivery palm oil contract, which is pegged to the Malaysian benchmark price, gained 0.3 percent to $724.50 a ton.

On the Dalian Commodity Exchange, January-delivery palm oil closed unchanged at 6,362 yuan ($931) a ton. Soybean oil dropped 0.3 percent to 7,410 yuan a ton.