Palm oil futures dropped to a one-year low after data
showing a slump in Malaysian palm oil exports this month added to pressure on
values from statistics showing a surprise rebuild in the country's inventories.
Palm oil futures for October delivery touched 2,174 ringgit
a tonne in Kuala Lumpur, the weakest for a benchmark contract since July last
year, before closing at 2,177 ringgit a tonne, down 2.5%.
The decline followed the release of two sets of downbeat
data, including from the Malaysian Palm Oil Board, which revealed Malaysia's
inventories of the vegetable oil rising by 24,300 tonnes last month from June,
to 1.68m tonnes.
Investors had forecast a drop of some 22,000 tonnes in
inventories to 1.64m tonnes.
The build in stocks reflected in part bigger-than-expected
production, at 1.67m tonnes, up 6.1%, or nearly 100,000 tonnes, month on month
- albeit in what is seasonally a strengthening period for output which typically
peaks in October.
Earlier in the year, a dry spell, and the prospect for more
assuming forecasts for an El Nino proved correct, raised concerns over output,
although the waning chances of the weather pattern setting in have eased such
fears for now.
"The lack of El Niño conditions is allowing for greater production, and this combined with strong North American soybean crop prospects as sent the market into a sharp tailspin," said Sterling Smith at Citigroup's Chicago office.
Malaysia's exports were a little softer than expectations in
July, at 1.45m tonnes, falling nearly 35,000 tonnes month on month - although during
a month which brought Ramadan, a period which can see strong demand ahead of
the Muslim festival on inventory builds, but softer orders during it.
Soft start to August
However, hopes of a post-Ramadan pick-up in Malaysia's palm
shipments were thrown into question when cargo surveyors showed a strong
decline in volumes during the first 10 days of August.
Societe Generale de Surveillance estimated exports down 19.6%
at 355,874 tonnes during the first 10 days of August, with particularly weakness
in exports to China, down 61% at 43,100 tonnes.
On Sunday, rival Intertek Testing Services put the decline
at 22%, to 347,094 tonnes, also highlighting a drop in volumes to China, which
it estimated falling 43% to 63,300 tonnes.