Malaysian crude palm oil futures fell 2.7 per cent to one-week lows yesterday as China’s move to tighten liquidity triggered profit-taking in global vegetable oil markets.

Crude oil easing below US$83 (US$1.00 = RM3.37) a barrel and expectations of higher production in soy-growing regions in South America also weighed on palm oil as well as soyoil markets in the US and China.

The benchmark March contract on the Bursa Malaysia Derivatives Exchange dropped as much as RM74 to RM2,628, its lowest since Dec. 31 last year. The contract settled at RM2,630.

US soyoil for Jan. delivery dropped 1.5 per cent and the most-active Sept. soybean oil contract on China’s Dalian Commodity Exchange tumbled 2.9 per cent.

“Commodity prices, especially on the vegetable oil side, have been overbought,” said a trader. “But the news from South America’s good production prospects and China starting to limit credit has provided the excuse to take profit.” Limiting credit might slow the pace of importing commodities into China, which annually buys about 6 million tonnes of palm oil.

It is also the world’s largest importer of soybeans, which get processed into soymeal and soyoil for the food and livestock sectors.

China’s central bank raised the auction yield of its three-month bills for the first time since mid-August in regular open market operations yesterday, signalling a significant step-up of its tightening of market liquidity. Source : Business Times

]]>