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Palm edges down from one-week high as Q3 output eyed

Palm edges down from one-week high as Q3 output eyedJAKARTA: Malaysian palm oil pulled back from a one-week high on Wednesday, with traders saying they expected an increase in production in the third quarter that could eliminate any shortage of the edible oil resulting from low output in July.

By the day’s close, benchmark palm oil for October delivery on Bursa Malaysia Derivatives was down 0.6 percent to 2,207 ringgit ($ 582.25) a tonne.

Expectations of low output in July lifted palm oil to 2,223 ringgit on Tuesday, its highest since July 14.

“Buyers are cautious of buying fresh. The lower output in July will be offset by better production in the third quarter,” said a trader with a local commodities brokerage in Kuala Lumpur.

Exports of Malaysian palm oil products for July 1-20 fell 15.5 percent to 907,574 tonnes from the same period a month ago, cargo surveyor Intertek Testing Services said in its latest estimate on Monday.

Another cargo surveyor, Societe Generale de Surveillance, reported a 16.1 percent drop in exports over the same period.

Volume on Wednesday stood at 29,998 lots of 25 tonnes each, below the roughly 35,000 lots usually traded in a day. Volumes were likely lower due to a recent Muslim holiday that was affecting business in Malaysia and Indonesia, another trader said.

Wang Tao, a Reuters market analyst for commodities technicals, said palm oil may drop to 2,190 ringgit a tonne, as it had failed to break a resistance level at 2,227 ringgit.

Indonesia, the world’s top palm oil producer, began collecting a levy on palm oil exports last week after several delays, a government official said on Wednesday, with the aim of adding up to 4.5 trillion rupiah ($ 336 million) this year to state coffers.

The tariff was largely priced in and not expected to have a further impact on prices, the second trader said. “The market has been bracing for it for the past four months,” the trader said.

The Malaysian ringgit gained 0.41 percent against the dollar on Wednesday, making palm oil less attractive to international buyers holding other currencies.

US August soyoil slipped 0.31 percent in afternoon Asian trade.

Crude oil prices fell on Wednesday after an unexpected rise in US crude stocks, adding to a picture of global oversupply that has dragged down values over the past year.

Copyright Reuters, 2015

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