KUALA LUMPUR (Dow Jones)--Crude palm oil futures on Malaysia's derivatives
exchange fell sharply Wednesday amid volatile speculative trading and the
possibility of ample soybean production in South America easing demand for palm
oil over the next three months, trade participants said.

  The benchmark June contract on Bursa Malaysia Derivatives ended MYR120 or
3.5% lower at MYR3,330 a metric ton after trading in a wide range between
MYR3,229 and MYR3,470.

  "Just as the prices were overdone on the upside (last month), they are now
overdone on the downside," London-based vegetable oil analyst Dorab Mistry told
Dow Jones Newswires in an interview late Tuesday.

  He said there is little fundamental backing for lower prices - and potential
exists for a reversal in the trend.

  The prospects for the ongoing South American soybean harvest are bright, and
higher Malaysian palm oil production has also eased supply concerns, he said.

  However, the recent slide in prices is linked more closely to a lack of
liquidity in global markets than to supply-demand fundamentals.

  "There is a lot of day trading going on; traders take positions and exit on
the same day, making the market very volatile," an official at a Kuala
Lumpur-based brokerage said.

  He said any external development that cuts across asset classes may well be
used by traders in speculative trading. Recent developments that have caused
palm oil futures prices to fall include speculation that Chinese buyers are
canceling export contracts finalized at higher prices and expectations of
higher global production of both soybean oil and palm oil.

  Technical analyst Han Hong Kong notes the low of Wave b is MYR3,277 in an
a-b-c countertrend to MYR3,470 from MYR3,171.

  He said closing below MYR3,277 would have indicated an increase in
bearishness in CPO prices.

  However, he said, the price charts still indicate that the larger downtrend
from the peak of MYR4,486 has not ended yet with the downside target at
MYR3,045-MYR3,014.

  A strong rally above the downward trendline and the base channel could mark
the end of this correction but it has to be accompanied by strong volume, Hong
Kong said.

  "There is a lot of uncertainty and nervousness; even any news remotely
connected with palm oil sparks a selloff," a trader in Kuala Lumpur said.

  Traders expect palm oil exports for the Mar 1-20 period to be between 850,000
and 870,000 metric tons.

  Cargo surveyor Intertek Agri Services estimated exports during Feb. 1-20 at
762,273 tons. Another surveyor, SGS (Malaysia) Bhd, estimated exports during
the period at 757,070 tons.

  Cargo surveyors are expected to issue estimates for Mar 1-20 by Friday.

  "Soyoil prices are still above the levels during yesterday's (Tuesday's) CBOT
electronic session, but both soyoil and palm oil are driving each other down on
speculative selling," said a Kuala Lumpur-based official at a commodities
brokerage.

  At 1055 GMT, the May soyoil contract on the Chicago Board of Trade was 100
points lower at 57.40 cents a pound in electronic trading.   Trading volume on
BMD fell to 17,936 lots Wednesday from 21,356 lots Tuesday. Open interest
totaled 41,228 lots, down from 43,406 lots.

  Cash palm olein for July/August/September traded at $1,180/ton and
$1,170/ton, a trader in Singapore said.

  He said cash palm olein for May/June traded at $1,190/ton and $1,185/ton and
for April at $1,250/ton and $1,240/ton.

  Cash CPO for prompt shipment was last offered MYR50 lower at MYR3,400/ton.

  "Most plantations have sold off their upcoming production well in advance
when prices were much higher. They are already oversold and it remains to be
seen whether buyers will be willing to accept all the deliveries at those
record-high prices after the latest downward correction," a Singapore-based
trader said.

  He said even if the contracts are revised, sellers will still make large
profits.

(Closing BMD CPO futures prices in MYR/ton at 1000 GMT)

Month      Close    Previous    Change    High     Low
Apr 08     3,360    3,449       Dn 89     3,464    3,254
May 08     3,345    3,450       Dn 105    3,466    3,234
Jun 08     3,330    3,450       Dn 120    3,470    3,229
Jul 08     3,320    3,439       Dn 119    3,455    3,230