Palm sees sharpest weekly drop in three months on stronger output forecast

[KUALA LUMPUR] Malaysian palm oil futures reversed gains made earlier in the day to fall on Friday evening, weighed down by expectations of rising output and profit taking despite a weaker ringgit, which lifted the market earlier in the day.

A weaker ringgit, palm's traded currency, usually lends support to the tropical oil by making it cheaper for foreign buyers. The ringgit weakened 0.4 per cent to reach 4.1550 against the dollar in the evening, its weakest point in over two weeks.

Benchmark palm oil futures for December on the Bursa Malaysia Derivatives Exchange fell 0.7 per cent to RM2,561 (S$842.42) a tonne at the end of the trading day. The contract hit its lowest in over a month on Thursday at RM2,538.

Palm is down 2.8 per cent for the week, its second straight week of losses and sharpest weekly decline since July 8.

Traded volumes stood at 55,078 lots of 25 tonnes each on Friday evening, more than the 2015 daily average of 44,600 lots.

Rising production numbers are contributing to market declines, said two traders in Kuala Lumpur, along with profit taking ahead of Malaysian government data.

"However, if production rises marginally it may signal that the high production period may come to an end," said one trader.

Output in Malaysia, the world's second largest palm producer after Indonesia, is seen gaining 4 per cent to 1.77 million tonnes in September, according to a Reuters survey of eight planters, traders and analysts showed ahead of the data release next week.

End-stocks are seen rising by 3.1 per cent to 1.51 million tonnes, while exports are expected to fall 15.5 per cent to 1.53 million tonnes.

September data from industry regulator the Malaysian Palm Oil Board is scheduled for release on Monday.

In other related vegetable oils, the soybean oil December contract on the Chicago Board of Trade was down 0.4 per cent.

REUTERS