According to Malaysian paper The News, the benchmark September contract on the Bursa Malaysia Derivatives Exchange fell 25 ringgit to close at 3,598 ringgit (€699) a tonne.

Prices for all vegetable oils, including palm oil, have soared in recent months, with many figures doubling or tripling due to squeezed supplies, rocketing energy costs and the birth of biofuels.

Figures from the World Bank earlier this month stated that palm oil prices had risen 2.9 per cent from May to June, due to reduced output in Malaysia and strong demand in India. Prices for palm oil have risen by almost a third since October 2007, although have leveled off slightly in the past three months.

In March this year the commodity traded at $1,249 a tonne, moving to $1,174 a tonne in April, and $1,208 a tonne in May. But these figures have tripled from annual averages in 2006 that saw palm oil pulling in prices of a far inferior $478 a tonne.

Palm oil is a popular ingredient in personal care where it is used most commonly as a hardener for vegetable oils soaps.

However, escalating prices are making it less appealing to formulators who are also concerning about the environmental questions raised by its use.

A slice of green campaigners argue that rising demand is leading to deforestation, destroying habitats for animals such as the orangutan, as well as contributing to rising carbon emissions.

Fearing a consumer backlash manufacturers have begun to take action.

Last month Anglo-Dutch food giant Unilever pledged to use only palm oil certified as sustainable by 2015, in addition to supporting calls for a moratorium on further deforestation for palm oil in Indonesia.

In ensuring Unilever's supplies come from sustainable sources, the firm said it hopes to take a leading role in establishing a certified supply chain for palm oil production.

"Suppliers need to move to meet the criteria, by getting certified both the palm oil from their own plantations and the palm oil they buy from elsewhere," said Patrick Cescau, Unilever CEO.