DJ Asian Crude Palm Oil Ends Down 1.3% On Rising Supply Fears

KUALA LUMPUR (Dow Jones)--Crude palm oil futures on Malaysia's derivatives exchange ended sharply lower Wednesday, backpedaling from earlier gains as investors booked profits amid expectations for improved palm production.

Concerns about the global economic recovery also weighed on prices, trade participants said.

The benchmark September contract on the Bursa Malaysia Derivatives exchange ended MYR31 or 1.3% lower at MYR2,270 a metric ton after moving in a MYR2,270-MYR2,303/ton range.

The market was initially buoyed by strength in crude oil prices. But without strong buying support, and with supplies rising in Indonesia and Malaysia--both major global palm oil producers--palm prices quickly gave up gains and slipped into negative territory.

Some trade participants expect prices to come off their lows in the next trading session as "the slew of bearish news and expectations for June output to be higher on month were already factored into today's slide," said a senior trading executive at a Kuala Lumpur-based brokerage.

Prices have been battered the past few weeks, declining 7.3% since June 1 due to worries about the strength of the global economic recovery and bearish supply outlooks.

"Though prices may come off their lows, any upside will be limited on fears that palm olein will trade at a higher premium over rival soyoil," said a Malaysia-based exporter.

Trade participants said Malaysia's palm oil output in June probably rose around 5%-10% on month with end-June palm oil inventory levels around 1.70 million tons.

The Malaysian Palm Oil Board is expected to issue June palm oil production, stock and export data Monday.

In the cash market, palm olein for July was offered $5 lower at $775/ton, while cash CPO for prompt shipment was offered MYR10 lower at MYR2,390/ton.

CME Group Inc.'s dollar-based CPO futures contract for September wasn't traded in Asia.

Rupiah-denominated September CPO futures on the Indonesia Commodity and Derivative Exchange were trading 0.9% lower at IDR6,205 a kilogram at 1015 GMT, with 177 lots done.

The October contract was trading 1.1% lower at IDR6,155/kg with 208 lots changing hands. One lot is equivalent to 10 tons.

Open interest on the BMD was 74,304 lots versus 73,253 lots Tuesday. One lot is equivalent to 25 tons.

A total of 14,018 lots of CPO were traded versus 14,104 lots Tuesday.

Closing BMD CPO futures prices in MYR/ton at 1000 GMT: 
 
Month   Close  Previous  Change    High    Low 
Jul'10  2,398     2,398  Unchanged 2,402   2,390 
Aug'10  2,305     2,330  Down 25   2,334   2,305 
Sep'10  2,270     2,301  Down 31   2,303   2,270 
Oct'10  2,250     2,282  Down 32   2,287   2,250 
 
 
  -By Shie-Lynn Lim, Dow Jones Newswires; +603 2026 1233;
shie-lynn.lim@dowjones.com