DJ Asian Crude Palm Oil Ends Lows; Exports Likely Higher

KUALA LUMPUR (Dow Jones)--Crude palm oil futures on Malaysia's derivatives exchange ended off lows Wednesday due to short covering and fresh buying interest related to expectations that palm oil exports will rise in the first 10 days in June, trade participants said.

The benchmark August contract on the Bursa Malaysia Derivatives exchange ended down MYR14 at MYR2,418 a metric ton, after falling as much as 1.2% to MYR2,402, its lowest level since Jan. 27.

CPO couldn't sustain early gains due to weak supply fundamentals and soyoil's widening discount to palm olein. Crude soyoil free-on-board Argentinian ports was offered $30-$40/ton cheaper than palm olein FOB Malaysian ports, a Singapore-based cash market trading executive said, adding that most buyers now prefer the cheaper soyoil to cash palm olein. "Palm prices will have limited upside until palm olein is back at a discount to soyoil," a Singapore-base trading executive said.

Late last year, palm olein was being offered at a wide discount to soyoil of more than $100/ton, but soyoil prices have fallen due to a record soybean crop from South America, and palm prices have remained steady due to expectations palm oil output in Malaysia and Indonesia will rise only rise marginally in 2010. The increase in output this year is expected to be capped by the delayed effects of a recent El Nino climate episode, accompanies by reduced rainfall, which lowered oil palm yields.

Malaysia's palm oil exports during the June 1-10 period are likely to rise 16%-20% from the first 10 days of May to around 426,000 tons, traders said.

Cargo surveyor Intertek Agri Services estimated May 1-10 exports at 354,504 tons, while another surveyor, SGS (Malaysia) Bhd., put the figure at 366,050 tons. Both surveyors will issue June 1-10 palm oil export data on Thursday.

Despite likely higher exports, prices remained in the red Wednesday due to strength in the ringgit, palm olein's
premium over soyoil and uncertainty ahead of key industry data due Thursday from the government-linked Malaysian Palm Oil Board, an executive from a Kuala Lumpur-based brokerage said.

The dollar fell to MYR3.3140 from yesterday's close of MYR3.3260, making CPO a more expensive raw material for refiners. In the cash market, palm olein for July/August/September was traded at $762.50/ton, while October/November/December traded at $745/ton, $742.50/ton and $752.50/ton.

Meanwhile, CME's Group Inc.'s (CME) dollar-based CPO futures for September was trading $4.25 lower at $718/ton with 14 lots traded. One lot is equivalent to 25 tons.

August rupiah-denominated CPO futures on the Indonesia Commodity and Derivative Exchange ended 1.2% lower at IDR6,525 a kilogram with 149 lots traded. One lot is equivalent to 10 tons. The September contract ended 1.2% lower at IDR6,425/kg with 202 lots done.

Open interest on the BMD was 73,231 lots, versus 71,105 lots Tuesday. One lot is equivalent to 25 tons.
A total of 25,460 lots of CPO were traded versus 14,202 lots Tuesday.

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

Month    Close    Previous    Change      High        Low
Jun'10    2,525    2,536        Down 11   2,535      2,506
Jul'10     2,454    2,478        Down 24   2,481      2,442
Aug'10  2,418    2,432         Down 14   2,438      2,402
Sep'10  2,395    2,407         Down 12   2,413      2,377

-By Shie-Lynn Lim, Dow Jones Newswires; +603 2026 1233; shie-lynn.lim@dowjones.com
(END) Dow Jones Newswires
06-09-10 0657ET
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