08/12/2010 (Bloomberg) - Palm oil dropped for the first time this week on speculation that China, the largest user of edible oils, may lift interest rates to cool inflation, reducing demand for the tropical commodity.

February-delivery futures fell 0.4 percent to 3,594 ringgit ($1,143) a metric ton on the Malaysia Derivatives Exchange. The price declined as much as 2.4 percent earlier, the most in two weeks. Prices reached a 29-month high of 3,610 ringgit on Dec. 5. The market was closed yesterday for a public holiday.

China is trying to rein in liquidity, combat accelerating inflation and limit the risk of asset bubbles as its economy continues to boom even as the recoveries in developed nations remain moderate. The country’s soybean imports may decline to 5.3 million tons this month from about 5.4 million tons in November, the trade ministry said yesterday.

“There were concerns that China is going to do something to tighten the monetary policy, so commodities across the board are reacting to that news,” said Ivy Ng, an analyst with CIMB Investment Bank Bhd. “The market is cautiously trading down a bit in anticipation of some of these potential measures.”

Global consumption of oilseed-products has increased “too rapidly,” paring stockpiles and pushing up prices of soybeans and rapeseed, Oil World said in a report yesterday.

Soybean imports by China, the biggest user of commodities, may rise about 40 percent in the fourth quarter, according to Oil World. The country is expected to buy 57 million tons in the marketing year that began Oct. 1, up 13 percent from a year ago, data from the U.S. Department of Agriculture show. Global usage may rise 6.8 percent, the USDA said Nov. 9.

‘Bullish Outlook’

“Both the near-term and mid-term technical outlook of the CPO market will remain bullish as long as prices stay above the 2,700 to 2,800 ringgit a ton area,” Shin Kao Jack, an analyst at OSK Research Sdn. said in a report today. Still, “the market will soon be facing a very tough challenge at the formidable 3,750 ringgit level. We might see the uptrend taking a breather at around this level.”

Should this level be taken out, the next resistance would be the 4,000 ringgit level, Shin said.

Palm-oil prices will decline this month, before gaining as much as 300 ringgit from January to April, Thomas Mielke, executive director of Oil World, told a conference on Dec. 3.

September-delivery palm oil on the Dalian exchange fell 3 percent to 9,072 yuan ($1,361) a ton. Soybean oil for delivery in the same month closed 2.3 percent lower at 9,710 yuan. CME Group Inc.’s March palm oil contract, pegged to the Malaysian benchmark price, shed as much as 2.1 percent to $1,107.75 a ton.