KUALA LUMPUR, May 27 (Reuters): Malaysian palm oil futures stretched losses into a third straight session on Tuesday, tracking weak vegetable oil markets overseas, with prices further pressured by concerns that export demand will not be strong enough to check rising stockpiles.
By the midday break, the benchmark August contract on the Bursa Malaysia Derivatives Exchange had edged down 0.8 per cent to 2,488 ringgit ($774) per tonne. Prices dropped to 2,483 ringgit on Monday, last seen in October 2013, before recovering to close at 2,509 ringgit.
Total traded volume on Tuesday stood at 13,489 lots of 25 tonnes, just above the average 12,500 lots.
"We expect Ramadan demand to be strong but I think that has been taken into consideration already. Exports will be strong in May and maybe up to the first half of June at best," said a trader with a foreign commodities brokerage.
The Muslim holy month of Ramadan, followed by the Eid al-Fitr festival, begins in end-June this year and typically boosts consumption of the tropical oil, which is used as a cooking oil and to make a variety of foodstuff.
Cargo surveyor data reported that exports of Malaysian palm oil products between May 1-25 rose 13-14 per cent from a month earlier, rising at a slower pace compared with a 23 per cent jump in the first half of May.
"Prices might be under further pressure because stocks are coming up a little bit faster," the Kuala Lumpur-based trader added. Malaysia's end-April palm stocks rose to a three-month high of 1.77 million tonnes.
Technicals showed Malaysian palm oil is expected to test support at 2,472 ringgit per tonne, a break below which will lead to a further loss to 2,422 ringgit, said Reuters market analyst Wang Tao.
Traders said a drop in U.S. and China soyoil prices also dragged on palm prices, as it narrows the tropical oil's discount to the rival edible oil and could shift food and fuel demand away.
The U.S. soyoil contract for July fell 0.7 per cent in early Asian trade, while the most active September soybean oil contract on the Dalian Commodities Exchange lost 0.2 per cent.
But palm prices could get a boost from the El Nino weather pattern that can bring drought to Southeast Asia, where most of the world's oil palm is cultivated. A majority of weather forecasting models indicate an El Nino could develop around the middle of the year.
Planters said the crop-damaging phenomenon will hinder yields of palm fruit, though the bigger impact on output will likely be felt in 2015.
"El Nino will certainly affect our palm trees. It will cause stress but the effect will not be so immediate, maybe a year or so down the road," Boustead
Plantations Chairman Lodin Wok Kamaruddin told reporters in Kuala Lumpur on Tuesday.
"All and all, we expect prices to steady around 2,700-2,800 ringgit in the third or fourth quarter of this year."
Indonesia, the world's top palm producer, held its export tax for crude palm oil at 12 per cent in June, unchanged from May, according to its ministry late on Monday. Malaysia, the No.2 grower, set its export duty for the crude grade at a more competitive 5.5 per cent in June.
