Palm dropped to a three-week low on speculation that slower economic growth in China, the largest buyer after India, may damp demand for the oil used in everything from noodles to biofuel.

The contract for September delivery lost as much as 1.3 percent to 2,381 ringgit ($745) a metric ton on the Bursa Malaysia Derivatives, the lowest price for most-active futures since June 5. Prices were at 2,384 ringgit at the close of the morning session. Palm for local physical delivery in July was at 2,400 ringgit, data compiled by Bloomberg show.

Goldman Sachs Group Inc. and China International Capital Corp. this week joined banks from Barclays Plc to HSBC Holdings Plc in paring their growth projections below the Chinese government’s 7.5 percent goal for this year. The cuts followed a cash crunch that sent interbank lending rates to records last week. The central bank said it will use tools to safeguard stability in money markets and tight liquidity is set to ease.

“The market remains bearish due to China’s liquidity crisis,” analysts Lee Chen Hoay, Sim Han Qiang and Joyce Liu at Phillip Futures Pte, wrote in a report today. While data showed exports are rising this month, “palm oil is still on a downtrend,” they said.

Shipments from Malaysia, the second-largest producer, rose 9.6 percent to 1.17 million tons in the first 25 days of June from the same period a month earlier, Intertek said yesterday.

Price Decline

Stockpiles are poised to jump 21 percent to a record 9.5 million tons in 2013-2014 and demand will advance 4.4 percent, the least in 12 years, U.S. Department of Agriculture data show. Futures will drop to 2,200 ringgit by the year end, a level last seen in 2009, according to the median of 13 trader, analyst and producer estimates compiled by Bloomberg.

Soybean oil for December delivery fell 0.7 percent to 45.61 cents a pound on the Chicago Board of Trade, while soybeans for delivery in November dropped 0.7 percent to $12.7025 a bushel.

Refined palm oil for January delivery declined as much as 1.7 percent to 5,826 yuan ($948) a ton on the Dalian Commodity Exchange, the lowest price for most-active futures since May 2, while soybean oil lost as much as 2.2 percent to 7,278 yuan, the lowest since May 6.

To contact the reporter on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

Source : Bloomberg