KUALA LUMPUR: Malaysian palm oil futures fell for a fourth consecutive session on Wednesday to their lowest level in nearly a year as mounting fears of a global recession hammered commodities.
Also reeling from higher supply prospects, the benchmark palm oil contract for September delivery on the Bursa Malaysia Derivatives Exchange fell 117 ringgit, or 2.8%, to 4,057 ringgit ($917.25) a tonne.
It had declined as much as 10% earlier in the session, but shed some losses after the Southern Peninsula Palm Oil Millers’ Association (SPPOMA) reported that July 1-5 production fell nearly 16% from the month before, according to traders.
The main factors for the meltdown are fund selling, Indonesia’s rising export quota and improving production, said Paramalingam Supramaniam, director of Selangor-based brokerage Pelindung Bestari.
“We are entering into peak production months with worries of end-stocks bulging towards 2 million tonnes by September.”
Malaysian palm oil has been on the back foot after Indonesia this week lifted its export quota to seven times the amount producers sell at home, up from five earlier, in a bid to cut soaring inventories of the edible oil.
Palm hits over 9-month low as Indonesia boosts exports
The world’s biggest producer is considering setting its crude palm oil export reference price every two weeks instead of monthly, a senior trade ministry official said, aiming to adjust quicker to fast-changing international market prices.
Higher Indonesian stocks, recession fears and crumbling prices of Dalian edible oils and crude futures over the past two days prompted some traders to sell, said Sandeep Singh, director of Kuala Lumpur-based Farm Trade.
The contract, which had soared earlier this year due to Russia’s invasion of Ukraine, is now trading at levels seen before the conflict.
Due to the price plunge and Indonesia allowing more exports, top buyer India’s palm oil imports in July are set to jump to the highest in 10 months, four dealers told Reuters.
Dalian’s most-active soyoil contract fell 5.5%, while its palm oil contract plunged 7.7%. Soyoil prices on the Chicago Board of Trade were up 0.3%.