Palm Oil Declines as Rainfall Boosts U.S. Soybean Crop Prospects

(BusinessWeek) – Palm oil dropped for the first time in four days on speculation that rain in the U.S. Midwest will halt deteriorating conditions of the soybean crop, boosting supplies of the oilseed crushed to make a substitute oil.

The contract for delivery in December declined as much as 1.1 percent to 2,329 ringgit ($719) a metric ton on the Bursa Malaysia Derivatives, and was at 2,336 ringgit at 11:30 a.m. in Kuala Lumpur. Palm oil for physical delivery in October was at 2,370 ringgit yesterday, data compiled by Bloomberg show.

Soybeans are headed for the first weekly decline in seven as rains over the main growing regions in the U.S. are seen beneficial for the crops. Precipitation may be highest over the eastern Midwest, and the east and south portion of the western Midwest, while a lack of cold weather will help crops mature, forecaster DTN said in a report yesterday.

“Because of the rain in recent days, there is speculation that this could result in a healthier crop than what was earlier expected,” said Arhnue Tan, an analyst at Alliance Investment Bank Bhd. “Ample supplies of soybeans could mean that there could be less demand for palm oil.”

Soybeans for November were little changed at $13.4075 a bushel on the Chicago Board of Trade. Futures are down 2.8 percent this week after rallying 17 percent in the six weeks ended Sept. 13. Soybean oil for December delivery fell for a fourth day, retreating 0.4 percent to 42.06 cents a pound.

Refined palm oil for January delivery lost 0.2 percent to 5,400 yuan ($882) a ton on the Dalian Commodity Exchange. Soybean oil for delivery in the same month fell 0.3 percent to 7,082 yuan a ton.