16/11/2010 (Bloomberg) - Palm oil dropped the most in more than a year on concerns that demand from China, the biggest cooking-oils user, may wane after a state newspaper said price- controls could be imposed on some commodities to cool inflation.

Price caps may be placed on food and punishment toughened on those found speculating on agriculture futures including corn and cotton, the China Securities Journal cited an unidentified person as saying.

The January-delivery contract slumped 3 percent at close to 3,270 ringgit a metric ton ($1,044) on the Malaysia Derivatives Exchange, the most since Oct. 2, 2009. The market is closed for a local holiday tomorrow.

The decline is “largely on concerns that China may break commodity prices,” said Kishore Narne, head of research with Anand Rathi Commodities Ltd. in Mumbai. “There’s also a general risk aversion due to a stronger dollar.”

The Dollar Index, which tracks the currency against those of six U.S. trading partners, rose for a second day, limiting the investment appeal of commodities such as gold, silver, crude oil, soybeans and palm oil.

Consumer prices in China gained 4.4 percent in October, higher than the government’s full-year inflation target of 3 percent. China’s central bank raised bank-reserve requirements last week and last month increased rates for the first time in three years to cool inflation.

“Prices of food and cotton have gone up to the point that the government has decided to step up efforts to crack down on speculation and make sure that inflation doesn’t flare up further,” Dong Shuzhi, manager at Beida Founder Commodities Co., said by phone from Shanghai today.

Price Manipulation
The Dalian Commodity Exchange said yesterday that it will curb “abnormal” trading to prevent the price manipulation and other activities that disrupt an orderly market.

Palm oil for September delivery in Dalian swung between gains and losses before ending 1 percent lower at 8,954 yuan ($1,349) a ton and soybean oil for delivery in the same month shed 1.5 percent to 9,670 yuan a ton.

India’s vegetable-oil imports reached a record 9.24 million tons, valued at 380 billion rupees ($8.4 billion), in the year ended Oct. 31, from 8.66 million tons a year ago, the Solvent Extractors’ Association of India said in an e-mailed statement today. Imports in October surged 25 percent from a year earlier to 832,699 tons, it said.

January-delivery soybean oil fell as much as 3.1 percent to 52.13 cents a pound in Chicago, while soybeans for delivery in the same month shed as much as 1.7 percent to $12.6450 a bushel.

CME Group Inc.’s March palm oil contract, pegged to the Malaysian benchmark price, declined as much as 2.9 percent to $1,048.50 a ton.