The benchmark September contract on the Bursa Malaysia Derivatives exchange ended MYR27 lower at MYR2,346 a metric ton after moving in a MYR2,342-MYR2,370 range.
Palm prices, having declined 2.3% so far this week, have "dropped too far and are technically oversold and this means prices are due for an upward correction," said a senior executive from a Kuala Lumpur-based brokerage.
But many trade participants said any rise in prices is likely to be short-lived as June's production figures are expected to rise 15% on month, outpacing export demand and leading to a rise in end-June palm inventory
Nevertheless, overall 2010 CPO output in Malaysia will likely fall below a previous forecast as unusually wet weather caused by a La Nina weather development may damage crops and reduce yields, Plantation and Commodities Minister Bernard Dompok said.
Dompok said he is revising his forecast for Malaysian CPO output to 17.8 million tons this year from a previous prediction of 18.1 million tons due to concerns over the likelihood of unusually wet weather in the second half of the year. Malaysia produced 17.6 million tons of CPO last year.
Dompok didn't give a prediction for CPO prices, but slower production growth in Malaysia, the world's second-biggest palm oil producer, could provide a floor for the market, which has seen a 13% fall in prices since the start of the year. CPO futures have been pressured by a record soybean crop in South America which narrowed the price gap between the two vegetable oils, making soyoil a cheaper alternative in some cases.
CME Group Inc.'s dollar-based CPO futures contract for September wasn't traded in Asia, while rupiah-denominated August CPO futures on the Indonesia Commodity and Derivative Exchange ended 0.2% lower at IDR6,325 a kilogram with three lots traded. One lot is equivalent to 10 tons. The September contract
ended 0.9% lower at IDR6,250/kg with 149 lots done.
Open interest on the BMD was 72,242 lots versus 74,789 lots Wednesday. One lot is equivalent to 25 tons.
A total of 13,225 lots of CPO were traded versus 15,164 lots Wednesday.
Closing BMD CPO futures prices in MYR/ton at 1000 GMT: Month Close Previous Change High Low Jul'10 2,411 2,425 Down 14 2,427 2,411 Aug'10 2,370 2,392 Down 22 2,398 2,368 Sep'10 2,346 2,373 Down 27 2,370 2,342 Oct'10 2,331 2,353 Down 22 2,355 2,327 -By Shie-Lynn Lim, Dow Jones Newswires; +603 2026 1233; firstname.lastname@example.org