Thursday, April 1, 2010

DJ Asian Crude Palm Oil Ends Down On Narrowing CPO-Soyoil Gap

KUALA LUMPUR (Dow Jones)--Crude palm oil futures on Malaysia's derivatives exchange ended lower Thursday as investors took cues from the diminishing differential between soyoil and palm olein prices to take profit, said trade participants.

The benchmark June contract on the Bursa Malaysia Derivatives exchange ended MYR13 lower at MYR2,543 a metric ton after trading in a MYR2,532-MYR2,549/ton range.

"Offer prices for palm olein are almost at par with crude soyoil...That places pressure on CPO prices even though crude oil rose toward $85 (in Asian trade)," said a trading executive with a Kuala Lumpur-based brokerage.

May light, sweet crude oil on the New York Mercantile Exchange was trading up 69 cents at $84.45 a barrel at 1009 GMT.

"It's difficult to get prices rallying even as palm inventories may fall in the coming months, as palm's discount to soyoil is very narrow now," said a Malaysia-based exporter.

He said CPO prices are likely to remain rangebound in the next trading session as some trading firms in the region will be closed Friday for the Easter holidays.

Soyoil's premium over palm is now around $7-$10/ton compared with more than $100/ton a few months ago, said trade participants. And that may narrow further, with soyoil to even trade at a discount to palm oil, which may prompt buyers to switch to the former. Both palm and soyoil compete for similar export destinations

Crude soyoil was last offered at $805/ton, free-on-board Argentine and Brazilian ports, while refined, bleached and deodorized palm olein was offered at $812.50/ton, FOB Malaysian ports, said a Singapore-based broker.

Industry analyst James Fry said the palm-soy price reversal may limit the rise in palm oil prices, even with palm inventories expected to show a seasonal decline in the next few months.

Palm inventories fell 11% on month to 1.79 million tons in February, while output was 13% lower on month at 1.16 million tons, according to data from the Malaysian Palm Oil Board.

In the cash market, palm olein for May shipment was traded at $802.50/ton, July/August/September at $790 and $792.50/ton and October/November/December at $780/ton, FOB Malaysian ports.

July/August/September CPO was traded at $762.50/ton, FOB Indonesian ports, said another  Singapore-based broker.

Cash CPO for prompt delivery was offered MYR30 lower at MYR2,600/ton.

Open interest on the BMD was 77,494 lots, down from 78,175 lots Wednesday.
One lot is equivalent to 25 tons.

A total of 22,873 lots of CPO were traded versus 14,488 lots Wednesday.

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

Month      Close    Previous   Change    High    Low 
Apr 2010   2,594    2,628      Down 34   2,605   2,584 
May 2010   2,555    2,565      Down 10   2,568   2,553 
Jun 2010   2,543    2,556      Down 13   2,549   2,532 
Jul 2010   2,535    2,536      Down 01   2,535   2,515 

-By Shie-Lynn Lim, Dow Jones Newswires; +603 2026 1233;

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