Palm Drops to Lowest This Year as Crude Fall Cuts Biofuel Appeal

(Businessweek) – Palm oil declined to the lowest level this year after crude oil fell, reducing the appeal of biofuels, as economic growth unexpectedly slowed in China, the world’s second-largest consumer.

The contract for June delivery lost 2.2 percent to 2,294 ringgit ($754) a metric ton on the Bursa Malaysia Derivatives, the lowest most-active price at close since Dec. 17. The commodity, used in everything from biofuels to noodles, has dropped 5.9 percent this year.

West Texas Intermediate fell below $90 a barrel for the first time in more than a month after China’s National Bureau of Statistics said gross domestic product in the first quarter rose 7.7 percent from a year earlier. That compares with the 8 percent median forecast in a Bloomberg survey and 7.9 percent in the prior quarter. Commodities measured by the Standard & Poor’s GSCI Index fell as much as 2.1 percent, the lowest since July, as gold slumped to a two-year low.

“When crude oil declines, the demand for biofuels suffers,” said Prathamesh Mallya, an analyst at AnandRathi Commodities Ltd. in Mumbai.

Malaysia left the export tax on crude palm oil unchanged at 4.5 percent for May, according to a Customs Department statement today. Exports from Malaysia fell 4 percent to 648,275 tons in the first 15 days of April from the same period in March, Intertek said today.

Soybean oil for July delivery dropped 0.9 percent to 49 cents a pound on the Chicago Board of Trade. Soybeans for July lost 0.5 percent to $13.7275 a bushel.

Refined palm oil for September delivery declined 2.5 percent to close at 6,168 yuan ($997) a ton on the Dalian Commodity Exchange. Soybean oil for delivery in the same month retreated 2.1 percent to end at 7,678 yuan a ton.