VEGOILS-Palm ends lower, high US soybean supply drags

Reuters

(Updates prices)

* Weaker soyoil markets narrow spread between palm oil to

$175 -trader

* U.S. government shutdown leaves traders in the dark

* Palm oil remains neutral in 2,265-2,332 ringgit range

-technicals

By Anuradha Raghu

KUALA LUMPUR, Oct 2 (Reuters) - Malaysian palm oil futures

ended lower on Wednesday, tracking weak soy markets, as

investors fretted about surging global supply of the competing

oilseed that could snatch demand away from the tropical palm.

U.S. soybeans traded near a 19-month low in the wake of a

government agricultural report that showed larger-than-expected

existing supplies as well as improving weather conditions for

new crops.

Larger supplies of soybeans for crushing into soyoil could

channel food and fuel demand away from palm oil. The drop in soy

oil prices have also narrowed palm oil's discount to the rival

vegetable oil, traders said.

"Soybean and soybean oil prices have touched new lows and

dragged our market down," said a trader with a foreign

commodities brokerage in Malaysia.

"For the past week the spread between crude palm oil and soy

has narrowed to $175 per tonne. All the while it has been above

$200," the trader added.

By Wednesday's close, the benchmark December contract

on the Bursa Malaysia Derivatives Exchange had edged

down 0.7 percent to 2,312 ringgit ($710) per tonne. Prices

traded in a range of 2,303-2,334 ringgit.

Total traded volumes stood at 35,439 lots of 25 tonnes each,

right at the average 35,000 lots.

Technicals showed that signals remain neutral for Malaysian

palm oil and will become clearer when the contract

gets out of a range of 2,265-2,332 ringgit per tonne, Reuters

market analyst Wang Tao said.

The shutdown of the U.S government, which includes the U.S.

Department of Agriculture, due to a budget impasse also weighed

on agricultural markets as many traders rely on USDA reports for

key information on crop conditions and export

sales.

In other markets, Brent crude oil extended losses below $108

a barrel on signs of improving global supply and expectations

that U.S. oil stockpiles are beginning to build.

In competing vegetable oil markets, the U.S. soyoil contract

for December edged down 1.02 percent in late Asian trade.

The Dalian Commodities Exchange is closed for a holiday and will

reopen on Oct. 8.

Palm, soy and crude oil prices at 1026 GMT

Contract Month Last Change Low High Volume

MY PALM OIL OCT3 2356 -12.00 2350 2367 492

MY PALM OIL NOV3 2316 -14.00 2308 2338 2959

MY PALM OIL DEC3 2312 -17.00 2303 2334 21720

CHINA PALM OLEIN JAN4 5384 -2.00 5370 5418 230740

CHINA SOYOIL JAN4 6960 -52.00 6934 7008 359152

CBOT SOY OIL DEC3 39.87 -0.40 39.82 40.33 9351

NYMEX CRUDE NOV3 101.75 -0.29 101.43 101.82 10965

Palm oil prices in Malaysian ringgit per tonne

CBOT soy oil in U.S. cents per pound

Dalian soy oil and RBD palm olein in Chinese yuan per tonne

Crude in U.S. dollars per barrel

($1 = 3.2345 Malaysian ringgit)

(Editing by Tom Hogue)

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