Palm oil falls to over 4-month low on stronger ringgit

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KUALA LUMPUR (Dec 5): Malaysian palm oil futures reached their lowest level in more than four months on Tuesday, as the ringgit strengthened, making the tropical oil more expensive for holders of foreign currencies.

The ringgit, palm's currency of trade, hit fresh 14-month highs in trade on Tuesday, but later weakened 0.2% against the dollar to 4.0660.

The benchmark palm oil contract for February delivery on the Bursa Malaysia Derivatives Exchange was down 1% at 2,563 ringgit a tonne at the end of the trading day, a second straight session of declines.

Earlier in the session, the contract fell as much as 1.7% to 2,544 ringgit, its lowest since July 24.     

Traded volumes stood at 48,938 lots of 25 tonnes each in the evening.

"The ringgit continues to strengthen," said a futures trader from Kuala Lumpur.

The Malaysian currency has gained over 4% since Nov 1 and about 10% so far this year. 

"Expectations about Malaysia's end-November stockpiles are also bearish," said the trader, as weaker exports last month are seen contributing to rising end-stocks. 

Production in Malaysia, the world's second largest producer after Indonesia, rose 12.9% in October from a month earlier, to hit the 2 million tonne mark, while end-stocks gained 8.4% to 2.2 million tonnes.

In other related oils, the January soybean oil contract on the Chicago Board of Trade was down 0.5%, while the January soybean oil contract on the Dalian Commodity Exchange fell 0.8%.

Meanwhile, China's Dalian January palm olein contract declined 1.3%.

Palm oil is impacted by movements in other edible oils, as they compete for a share of the global vegetable oils market.

Falling production of rapeseed in India, however, could boost demand for palm oil, as India imports about two-thirds of its edible oil demand. India's rapeseed and mustard output is set to drop by at least 10% for the 2017/18 crop year, as scant rain and high temperatures prompted farmers to switch to other crops.

Palm oil may fall into a range of 2,519 ringgit to 2,555 ringgit per tonne, said Wang Tao, a Reuters market analyst for commodities and energy technicals.
      
 Palm, soy and crude oil prices at 1100 GMT

Contract Month Last Change Low High Volume
MY PALM OIL DEC7 2450 -24.00 2445 2456 125
MY PALM OIL JAN8 2533 -24.00 2509 2544 4402
MY PALM OIL FEB8 2564 -25.00 2544 2582 22116
CHINA PALM OLEIN MAY8 5386 -86.00 5362 5486 336392
CHINA SOYOIL MAY8 5978 -60.00 5954 6064 326096
CBOT SOY OIL JAN8 33.28 -0.08 33.26 33.54 8343
INDIA PALM OIL DEC7 576.30 -4.20 575.00 579 998
INDIA SOYOIL DEC7 723.5 -3.80 723.5 726 6150
NYMEX CRUDE JAN8 57.18 -0.29 57.14 57.64 90241

 Palm oil prices in Malaysian ringgit per tonne
 CBOT soy oil in U.S. cents per pound
 Dalian soy oil and RBD palm olein in Chinese yuan per tonne
 India soy oil in Indian rupee per 10 kg
 Crude in U.S. dollars per barrel
 
(US$1 = 4.0510 ringgit)
(US$1 = 64.3000 Indian rupees)
(US$1 = 6.6110 Chinese yuan)