The benchmark June contract on the Bursa Malaysia Derivatives ended down MYR39 or 1.5% at an intraday low of MYR2,500 a metric ton.
The June contract had breached key resistance at MYR2,530, then MYR2,510 in late trade, making the market vulnerable to further declines in the next trading session, a senior trading executive based in Kuala Lumpur said.
"Investors were scurrying to take profits after prices weren't able to rise above MYR2,555/ton and it's likely prices may ease to around MYR2,460, as there are many bearish factors weighing on prices," he said.
The rally in the ringgit, which has gained 6.6% so far this year, was the "biggest impact to the decline in palm oil prices," said Lee Shin Cheng, executive chairman at IOI Corp. The currency's strength weighs on palm oil prices as it makes CPO, a key feedstock for refiners, more expensive and narrows their profit margins.
Lee also expects CPO output at its company to decline 8% in the 2010 fiscal year due to a labor shortage at its estates and an El-Nino weather condition last year that reduced rains and sapped palm fruit yields.
Palm production at IOI, the second largest listed palm producer in Malaysia, totaled 3.63 million tons in the 2009 fiscal year, according to the company's 2009 annual report.
Also weighing on palm prices is improved palm output in April, which may boost supply of the oil in the country, trade participants said.
March output is likely to have risen as well, between 7%-16% on month, as February was a shorter month and harvesting activity had spilt over to March, plantation company executives and traders said.
February CPO output totaled 1.16 million tons, according to the Malaysian Palm Oil Board.
The government-backed MPOB is scheduled to release March export, production and inventory data Monday.
In the cash market, palm olein for July/August/September shipment traded at $807.50/ton and $810/ton, May/June at $812.50/ton, and October/November/December at $795/ton, free-on-board Malaysian ports, a Singapore-based trading executive said.
Cash CPO for prompt delivery was offered MYR10 lower at MYR2,560/ton.
Open interest on the BMD was 78,915 lots, up from 78,794 lots Wednesday. One lot is equivalent to 25 tons.
Some 17,847 lots were traded versus 12,606 lots Wednesday.
Closing BMD CPO futures prices in MYR/ton at 1000 GMT:
Month Close Previous Change High Low Apr 2010 2,550 2,572 Down 22 2,578 2,550 May 2010 2,520 2,550 Down 30 2,563 2,520 Jun 2010 2,500 2,539 Down 39 2,555 2,500 Jul 2010 2,495 2,530 Down 35 2,545 2,495
-By Shie-Lynn Lim, Dow Jones Newswires; +603 2026 1233;