23/11/2010 (Bloomberg) - Palm oil declined for a second day to the lowest level in three weeks on concern that China may reduce imports as the world’s biggest consumer of cooking oils takes steps to cool food prices.

Futures for delivery in February dropped 2.2 percent to 3,115 ringgit ($993) a metric ton on the Malaysia Derivatives Exchange, the lowest level at close since Nov. 3. Prices fell 4.3 percent yesterday, the most since Aug. 17, 2009, on China’s plan to sell cooking-oil stockpiles to meet demand.

“Concerns about China tightening interest rates to cool inflation have risen again,” Veeresh Hiremath, associate chief analyst at Karvy Comtrade Ltd. in Hyderabad. “Soybean oil shed gains on Chinese worries and palm oil followed.”

Natural-rubber and cotton futures in China dropped by the daily 5 percent limit after the government said it would crack down on the use of bank credit to speculate in agricultural markets. The country will also prohibit the use of loaned funds for speculation, hoarding and artificially inflating prices of farm products, the China Banking Regulatory Commission said on its website yesterday.

China’s government will sell soybeans and vegetable oil from its reserves starting this week, the State Administration of Grain said in a separate statement on Nov. 19.

The country may import 1.4 million tons of soybean oil this year, 40 percent less than a year ago, Grain.gov.cn said in e- mailed daily report. Palm oil imports may decline 13 percent to 5.6 million tons, the information provider said. Grain.gov.cn is owned by the China National Grain & Oils Information Center.

Korea Skirmish
Exchanges of artillery fire between North Korea and South Korea lifted the dollar and pushed commodities including palm oil, crude oil and gold lower, Karvy’s Hiremath said.

“The Korean skirmish is one of the reasons for the declines in commodities across the board,” Hiremath said.

January-delivery soybean oil lost as much as 1.4 percent to 48.84 cents a pound in Chicago, reversing a gain of as much as 1.2 percent.

September-delivery palm oil futures on the Dalian Commodity Exchange declined 1.3 percent to 8,448 yuan ($1,272) a ton, and soybean oil for delivery in the same month dropped 1 percent to 9,164 yuan a ton. CME Group Inc.’s March palm oil contract, pegged to the Malaysian benchmark price, dropped as much as 4.2 percent to $980 a ton.