06/05/2011 (Bloomberg) - Palm oil fell for a second day, tracking declines in soybeans, which fell on speculation that persistent rains in the growing regions in the U.S. will encourage farmers to plant more of the oilseed than corn.

The July-delivery contract declined 1.1 percent to 3,229 ringgit ($1,076) a metric ton on the Malaysia Derivatives Exchange, the lowest close since Nov. 24, erasing gains of as much as 0.8 percent in intraday trading.

Rain in the Northern Plains in the U.S. will likely slow planting of corn, soybeans and spring wheat, while heavier precipitation is expected to return to the Midwest next week, Telvent DTN Inc. said in a forecast yesterday.

“Wet-weather forecast in the U.S. may prompt the farmers to go for soybean planting rather than corn planting,” Veeresh Hiremath, associate chief analyst with Karvy Comtrade Ltd., said by phone from the Indian city of Hyderabad. “Global demand is declining, especially from China.”

Palm oil also fell after a drop in crude oil prices eroded the appeal of the vegetable oil for biofuel usage, he said.

Oil declined for a fourth day in New York, the longest losing streak in eight weeks, as a drop in gasoline demand added to signs of slowing growth in the U.S., the world’s biggest crude consumer. Crude for June delivery lost as much as $3.04 to $106.20 a barrel on the New York Mercantile Exchange, the lowest since April 14.

A “better” soybean crop in Latin America, “improving” output in Malaysia and Indonesia and “sluggish” exports to China and India have sent prices lower, Standard Chartered analyst Abah Ofon said in a report yesterday. “We expect resurgent demand from China and India to buoy prices” in the second half, he wrote.

Production Outlook

Palm oil has dropped 19 percent from a 35-month high of 3,967 ringgit reached on Feb. 10 on an outlook for improving production.

July-delivery soybeans fell as much as 0.9 percent to $13.3950 a bushel on the Chicago Board of Trade, while soybean oil for delivery in the same month dropped as much as 1 percent to 56.61 cents and was at 56.69 at 7:31 p.m. Palm oil and soybean oil are substitutes in food and fuel uses.

January-delivery palm oil on the Dalian Commodity Exchange closed little changed at 9,084 yuan ($1,399) a ton. Soybean oil for delivery in the same month declined 0.2 percent to 10,106 yuan a ton at the close.

CME Group Inc.’s most-active July palm-oil contract, pegged to the Malaysian benchmark, advanced 1.2 percent to $1,095 a ton at 3:43 p.m. Singapore time.