Palm Oil Tumbles as USDA Raises Forecast for Soybean Supplies

(Businessweek) – Palm oil slumped the most in more than four months after the U.S. government increased estimates for the country’s soybean output and stockpiles before the next harvest, boosting the outlook for global oilseed supplies.

The contract for September delivery retreated as much as 2.7 percent to 2,307 ringgit ($727) a metric ton on the Bursa Malaysia Derivatives, the steepest drop for most-active futures since Feb. 25, and was at 2,316 ringgit at 5:38 p.m. in Kuala Lumpur. Prices are down 3 percent this week. Palm for local physical delivery in July was at 2,370 ringgit, data compiled by Bloomberg show.

Soybean reserves in the U.S., the biggest shipper, will total 295 million bushels (8 million tons) on Aug. 31, 2014, the Department of Agriculture said in a report yesterday. That’s 11 percent more than the 265 million bushels forecast in June. Output will jump to an all-time high of 3.42 billion bushels, more than the 3.39 billion estimated last month, the USDA said.

“The USDA numbers were bearish,” said Paramalingam Supramaniam, director at brokerage Pelindung Bestari Sdn. in Selangor. “This will pressure palm oil because of the anticipation of higher global cooking oil supplies.”

Palm oil’s discount to soybean oil shrank to $253.44 a ton on June 27, the smallest since August, and was at $277.93 today. The two edible oils are substitutes in food and fuel uses.

Soybean oil for delivery in December was little changed at 45.71 cents a pound on the Chicago Board of Trade, while soybeans for delivery in November declined 0.3 percent to $12.87 a bushel. Refined palm oil for January delivery fell 1.9 percent to close at 5,818 yuan ($948) a ton on the Dalian Commodity Exchange, while soybean oil for delivery in the same month dropped 1 percent to end at 7,282 yuan.