Palm oil futures tumbled despite data showing a smaller-than-expected rise in Malaysian stocks last month, and a firm start to September for exports, as traders fretted factors from crude to soybeans.
Palm oil inventories in Malaysia, the second-ranked producer and exporter of the vegetable oil after Indonesia, rose by a modest 1,500 tonnes to 1.66m tonnes last month, the Malaysian Palm Oil Board said.
The increase was well below the rise to 1.73m tonnes that investors had expected, reflecting a seasonal rise in production which, at 3.4% to 1.74m tonnes, was also a little lower than analysts had forecast.
Malaysian exports, at 1.52m tonnes, were in line with expectations, and up 7.4% on the July figure, swollen by shipments to China, a major palm oil importer, ahead of its Mid-Autumn festival which begins later this month.
Exports started this month strong too, up 6.8% for the first 10 days, compared with the same period of August, according to Societe Generale de Surveillance.
Rival cargo surveyor Intertek pegged the rise at 10.8%.
Palm oil data, difference on month and (on market forecasts)
Production: 1.735m tonnes, +66,212 tonnes, (-22,700 tonnes)
Exports: 1.524m tonnes, +104,548 tonnes, (-6,500 tonnes)
Closing stocks: 1.666m tonnes, +1,804 tonnes, (-64,400 tonnes)
Source: MPOB, ThomsonReuters poll
Nonetheless, palm oil futures tumbled 2.0% to 2,351 ringgit a tonne in Kuala Lumpur, a reflection in part of weakness elsewhere in the oilseeds complex in Chicago soybeans, which traded weak overnight, before showing small gains early in the live trading session.
"It should be noted that palm oil prices have been driven by US soybean crop expectations in recent months, not by Malaysian data," VSA Capital analyst Edward Hugo said.
'Prices to lose support'
Crude oil prices - another major input for palm oil futures, given the vegetable oil's status as a biodiesel feedstock – also weighed, as Brent crude dropped more than 2% back below $111 a barrel.
And traders also cited ideas that the balance sheet may be eased by continuing strength in Malaysian output, in what is a seasonally high period for production, at a time when there are signs of a dent to Indian demand from a weak rupee.
"With palm oil in the high production cycle in the second half of the year and weak demand from destination markets especially India, palm oil prices are likely to lose support," Sim Han Qiang, analyst at Phillip Futures in Singapore, said.