(Jan 29): Malaysian palm oil futures dropped on Friday to the lowest level in a week on slowing exports and as the Malaysian ringgit gained strength.
The palm oil contract for April on the Bursa Malaysia Derivatives Exchange closed 1.53% down at RM2,445 per tonne, after dropping to RM2,433 earlier in the day, the lowest level since Jan. 21.
The contract hit a high of RM2,512 on Thursday, the highest since May 28, 2014.
Traded volume stood at 41,078 lots of 25 tonnes each.
"Slowing exports are putting pressure on palm oil," said Alfred Mah, director of brokerage Matthes & Porton.
"We could see another 100-ringgit downside before a recovery."
In the last few weeks palm oil has rallied on expectations output from top producers Indonesia and Malaysia would be crimped by El Nino's dry weather effects.
The El Nino weather phenomenon brings heavy rains across South America but scorching heat in Southeast Asia, impacting palm's fresh fruit yields and lowering output.
Malaysia's palm output is only expected to rise 0.7% this year, while Indonesian production is seen at 35 million tonnes from 32.5 million tonnes in 2015.
"Strengthening ringgit could hit exports and nullify the impact of lower production," said a dealer based in Kuala Lumpur.
The ringgit jumped 1.4% against the dollar on Friday to their highest level in over three months.
Stockpiles in Malaysia as of end-December were at 2.6 million tonnes, down from an all-time high of 2.9 million tonnes a month ago. .
In related markets, the US March soyoil contract was down 0.11%, while the May soybean oil contract on the Dalian Commodity Exchange fell 1%.
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