Palm oil futures had its biggest drop in eight days on concern that the rising production this quarter may cut price rally speculations.
“It could go even lower,” said Ong Chee Ting, an analyst at Maybank Investment Bank in Kuala Lumpur. “There’s a lot of speculative elements and production could tap the upside for palm oil as well as for soybeans.”
Palm oil for September delivery dropped 3.7 per cent to 2,175 ringgit ($618) a tonne on the Malaysia Derivatives Exchange. The commodity has gained 28 per cent this year.
“We’re expecting palm oil production to go up till August,” said Ong.
Palm oil production in Indonesia and Malaysia, which account for about 90 per cent of world output, is typically higher in the second half of the calendar year.
Soybean oil, crushed from the oilseed, is a substitute for palm oil in food and biofuel.
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