IOI thinks palm oil price can hit RM3,000 soon

IOI Corp Bhd (1961)anticipates palm oil prices to hit RM2,800 to RM3,000 a tonne in the next few months as it braces for lower output.
As one of the most efficient planters and biggest palm oil producers in the country, IOI's price forecast is highly awaited by vegetable oil traders and analysts around the world.

IOI executive chairman Tan Sri Lee Shin Cheng said that he expected the group's current-year palm oil output to fall as much as 8 per cent to around 715,000 tonnes.

In the last financial year ended June 30 2009, IOI managed to squeeze 777,310 tonnes of palm oil from its 80-odd estates.

"I still hold the forecast at between RM2,800 and RM3,000 per tonne because of localised weather phenomenon like El Nino that affects output. There's also the labour shortage issue - workers come and go," Lee told reporters on the sidelines of the official opening of Hong Leong Bank's branch in Bandar Puteri Puchong, Selangor, yesterday.
At an economic conference two months ago, when palm oil was trading at around RM2,400 a tonne, Lee said he was optimistic of prices trending upward to between RM2,800 and RM3,000 a tonne.

The price did rise to a high of RM2,700 a tonne, but has fallen rapidly in the last four weeks.

When asked why, Lee replied: "The US dollar has weakened against a stronger ringgit and that has dragged palm oil prices (lower) to a certain extent."

According to Bank Negara Malaysia's website, US$1 is at RM3.21 currently, from RM3.45 a month ago.

Lee does not expect the palm oil price to continue falling.

"Demand for palm oil is very strong all around the world, especially traditional markets. Palm oil is the best vegetable oil in the world. It is nutritious and far more flexible in its applications," he said.

Yesterday, third-month benchmark crude palm oil on the Bursa Malaysia Derivatives market traded RM39 lower to close at RM2,500 a tonne.

- BUSINESS TIMES

DJ Asian Crude Palm Oil Ends Down On Profit-Taking, Crude Oil

KUALA LUMPUR (Dow Jones)--Crude palm oil futures on Malaysia's derivatives exchange ended lower Thursday as investors took profits on lower crude oil and an improved supply outlook for March and April, trade participants said.

The benchmark June contract on the Bursa Malaysia Derivatives ended down MYR39 or 1.5% at an intraday low of MYR2,500 a metric ton.

The June contract had breached key resistance at MYR2,530, then MYR2,510 in late trade, making the market vulnerable to further declines in the next trading session, a senior trading executive based in Kuala Lumpur said.

"Investors were scurrying to take profits after prices weren't able to rise above MYR2,555/ton and it's likely prices may ease to around MYR2,460, as there are many bearish factors weighing on prices," he said.

The rally in the ringgit, which has gained 6.6% so far this year, was the "biggest impact to the decline in palm oil prices," said Lee Shin Cheng, executive chairman at IOI Corp. The currency's strength weighs on palm oil prices as it makes CPO, a key feedstock for refiners, more expensive and narrows their profit margins.

Lee also expects CPO output at its company to decline 8% in the 2010 fiscal year due to a labor shortage at its estates and an El-Nino weather condition last year that reduced rains and sapped palm fruit yields.

Palm production at IOI, the second largest listed palm producer in Malaysia, totaled 3.63 million tons in the 2009 fiscal year, according to the company's 2009 annual report.

Also weighing on palm prices is improved palm output in April, which may boost supply of the oil in the country, trade participants said.

March output is likely to have risen as well, between 7%-16% on month, as February was a shorter month and harvesting activity had spilt over to March, plantation company executives and traders said.

February CPO output totaled 1.16 million tons, according to the Malaysian Palm Oil Board.

The government-backed MPOB is scheduled to release March export, production and inventory data Monday.

In the cash market, palm olein for July/August/September shipment traded at $807.50/ton and $810/ton, May/June at $812.50/ton, and October/November/December at $795/ton, free-on-board Malaysian ports, a Singapore-based trading executive said.

Cash CPO for prompt delivery was offered MYR10 lower at MYR2,560/ton.

Open interest on the BMD was 78,915 lots, up from 78,794 lots Wednesday. One lot is equivalent to 25 tons.

Some 17,847 lots were traded versus 12,606 lots Wednesday.

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

Month      Close    Previous   Change    High    Low 
Apr 2010   2,550    2,572      Down 22   2,578   2,550 
May 2010   2,520    2,550      Down 30   2,563   2,520 
Jun 2010   2,500    2,539      Down 39   2,555   2,500 
Jul 2010   2,495    2,530      Down 35   2,545   2,495 

-By Shie-Lynn Lim, Dow Jones Newswires; +603 2026 1233;
shie-lynn.lim@dowjones.com

DJ Malaysia End-March Palm Oil Stocks Likely Down 5%-6% -Trade

KUALA LUMPUR (Dow Jones)--Malaysia's palm oil inventories in March may have declined 5%-6% to around 1.68 million-1.70 million metric tons despite strong growth in production, as export demand for palm oil also improved, trade participants and plantation company executives said Thursday.

Crude palm oil futures have fallen 3.2% since March 1 under the weight of rising production. Plantation company executives said March crude palm oil output rose 7%-16% from the previous month.

However, end-March inventory numbers will likely decline because production may not be high enough to meet consumption, a senior trading executive based in Kuala Lumpur said.

The Malaysian Palm Oil Board is due to report output, exports and palm stocks data on Monday. CPO production was estimated at 1.16 million tons in February, while palm oil inventories at end-February were at 1.78 million tons, the MPOB said.

Export estimates by two cargo surveyors showed rising exports for March. Intertek Agri Services said shipments rose 12.1% to 1.35 million tons, while SGS (Malaysia) Bhd. said exports were up 7.7%, also at 1.35 million tons.

Analysts said March output rose significant on month because February was a shorter month and harvesting activities had spilt over to March, but growth reported by company executives came in a wide range from 7%-16%.

"Output at our palm estates has shown a single-digit increase (in March)," Lee Oi Hian, chief executive at Malaysia-based listed plantation company Kuala Lumpur Kepong Bhd. (2445.KU) said.

CPO production is likely to improve further in April, but the rise won't be "too much, as yields would be  affected by the El Nino-induced dry spell in the second half of 2009," a Malaysia-based planter said. A  prolonged dry spell lasting two successive months normally affects future yields.

Some trading executives put palm oil imports from Indonesia between 70,000 and 80,000 tons. Shipments from the world's largest palm oil-producing nation have likely risen due to a rush to ship out the oil to avoid ahigher export tax effective in April.

An official at Indonesia's Ministry of Trade said last month that it would raise the palm oil export tax to 4.5% this month from 3%.

-By Shie-Lynn Lim, Dow Jones Newswires; +603 2026 1233;
shie-lynn.lim@dowjones.com

DJ MARKET TALK: CBOT Soyoil Rally May Support CPO Futures

[Dow Jones] Soyoil futures' rally to four-week high on CBOT Wednesday may mean spillover buying support for CPO futures today, says Kuala Lumpur-based broker; adds concerns about Argentinian soyoil exports to China to be soyoil price-supportive. May soyoil finished 26 points higher on CBOT at 40.03 cents/pound Wednesday.

(shie-lynn.lim@dowjones.com)

Call us in Kuala Lumpur: +(603) 2026 1233;

DJ MARKET TALK: BMD CPO Futures May Open Little Changed

[Dow Jones] BMD June CPO futures expected to open little changed to MYR15 higher, tracking soyoil futures gains. "The ringgit is a tad weaker today, and this may give some leverage to CPO futures," says Kuala Lumpur-based broker, adds CPO likely rangebound, trading in MYR2,530-MYR2,550/ton range today. "Firmer soyoil (on CBOT) puts palm prices back at a discount to soyoil, which may be a good enough excuse for speculative buying in today's trade," says analyst at Kuala Lumpur-based Kenanga Deutsche Futures, pegging resistance at MYR2,565/ton. Benchmark BMD June CPO futures settled MYR19 higher at MYR2,539/ton yesterday.

(shie-lynn.lim@dowjones.com)

Call us in Kuala Lumpur: +(603) 2026 1233;

DJ Asian Crude Palm Oil Ends Higher; Market Rangebound

KUALA LUMPUR (Dow Jones)--Crude palm oil futures on Malaysia's derivatives exchange ended higher Wednesday, buoyed by gains in soyoil futures and fresh buying support, but failed to break out of their recent range.

The market is likely to stay rangebound until Monday, when the main Malaysian palm-oil industry body is due to release key palm oil export, supply and inventory data, trade participants said.

The benchmark June contract on the Bursa Malaysia Derivatives settled up MYR19 at MYR2,539/ton after moving in a narrow MYR2,530-MYR2,545/ton range.

The major earthquake that struck off in Indonesia's Sumatra island had little impact on palm oil prices after traders and industry officials said there wasn't major damage to Belawan and Dumai ports, both major shipment points for commodities such as palm oil and rubber. Indonesia is the world's largest producer of palm oil.

"There's no major disruption to shipments of palm oil so far," a senior trading executive at Jakarta-based major plantation company said.

Crude oil's brief rise to $87 a barrel, and gains in soyoil futures during Asian trading hours, kept palm oil prices in positive territory, but "bearish supply-fundamentals and the strengthening ringgit suppressed gains on BMD today," a trading executive in Kuala Lumpur said.

Malaysia's CPO output in March likely rose 16.6% on month to 1.35 million metric tons, the executive said. February CPO output totaled 1.16 million tons, according to the Malaysian Palm Oil Board.

The government-backed MPOB is scheduled to release March export, production and inventory data Monday.

On the New York Mercantile Exchange, light, sweet crude oil for May delivery rose to $87 a barrel in Asian trade, while May soyoil on the Chicago Board of Trade was trading up 12 points at 39.89 cents a pound by the end of trade on the BMD.

In the cash market, palm olein for July/August/September shipment traded at $802.50/ton and $805/ton, free-on-board Malaysian ports, a Singapore-based trading executive said.

Cash CPO for prompt delivery was offered MYR5 higher at MYR2,570/ton.

Open interest on the BMD was 78,794 lots, up from 78,562 lots Tuesday. One lot is equivalent to 25 tons.

Some 12,606 lots were traded versus 17,008 lots Tuesday.


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

Month      Close    Previous   Change    High    Low 
Apr 2010   2,572    2,565      Up  7     2,580   2,569 
May 2010   2,550    2,530      Up 20     2,553   2,540 
Jun 2010   2,539    2,520      Up 19     2,545   2,530 
Jul 2010   2,530    2,512      Up 18     2,536   2,521 

-By Shie-Lynn Lim, Dow Jones Newswires; +603 2026 1233;
shie-lynn.lim@dowjones.com

DJ MARKET TALK: CBOT Soyoil May Support BMD CPO Futures

[Dow Jones] Soyoil rally to one-week high on CBOT may give some support to CPO futures initially, trading executives say. May soyoil finished 37 points higher at 39.35 cents/pound on CBOT; last trading 25 points lower at 39.10 cents/pound.

(shie-lynn.lim@dowjones.com)
Call us in Kuala Lumpur: +(603) 2026 1233

DJ MARKET TALK: BMD CPO Futures Expected To Open Tad Higher

[Dow Jones] BMD CPO futures expected to open MYR5-MYR10 higher on fresh buying, positive leads from crude oil; but gains unlikely to last. "The market may open a tad higher on crude oil but the gains on  buying support may be followed by profit-taking due to bearish palm oil supply fundamentals," says trading executive based in Singapore. Traders expect higher CPO inventories in March, April due to rise in output in Malaysia, Indonesia. Nymex May crude settled up $1.75 at $86.62/bbl Monday, its highest price since October 2008.

CPO futures may try to test MYR2,510, then MYR2,500/ton today, says analyst in Kuala Lumpur. Benchmark BMD June CPO futures finished MYR29 lower yesterday at intraday low of MYR2,530/ton.

(shie-lynn.lim@dowjones.com)

Call us in Kuala Lumpur: +(603) 2026 1233

DJ OIL FUTURES: Crude At Highest Price Since Oct '08 On US Jobs Growth

By Brian Baskin
Of DOW JONES NEWSWIRES


NEW YORK (Dow Jones)--Crude futures added to last week's rally Monday as the market opened for the first time since Friday's report of the biggest increase in U.S. employment in three years.

Light, sweet crude for May delivery traded $1, or 1.2%, higher at $85.87 a barrel on the New York Mercantile Exchange, with the day's intraday peak of $85.97 the highest since October 2008. Brent crude on the ICE futures exchange traded 93 cents, or 1.1%, higher at $84.94 a barrel.

The latest high represented a delayed reaction to Friday's report from the U.S. Labor Department of a 162,000 gain in nonfarm payrolls in March. Most markets, including oil, were closed that day for Good Friday, meaning the current trading day is the first chance for investors to react to the data.

Although the number of new jobs came in below the economists' consensus forecast, any decline in unemployment is welcome news after months of improving economic conditions without job creation. Lower unemployment also helps demand for gasoline by increasing the number of commuters.

With the jobs picture finally appearing to improve, oil's recent gains may have more staying power. Prices have topped $83 a barrel several times this year, only to quickly fall back as investors worried that futures had risen faster than the gradual economic recovery warranted.

"You had a breakthrough...the economy is trying to mend itself and that caused the market to break through these resistance areas," said Tony Rosado, a broker with GA Global Markets. Oil at "$88 is just around the corner."

Oil prices had already risen 5.7% last week before the jobs figure came out, largely on signs that economic activity in Asia remains strong. Traders have largely tied their outlook--and $80 a barrel crude--to a rapid increase in demand in China and other developing economies, as the U.S. recovery has been slow to gain momentum.

Friday's jobs report likely doesn't change that dynamic, as U.S. demand is still expected to see anemic growth this year.

"This expected oil demand improvement during the second half of this year can be a powerful driving force regardless if it is actually realized or not," wrote Jim Ritterbusch, president of the trading advisory firm Ritterbusch and Assoc. in Galena, Ill.

Front-month May reformulated gasoline blendstock, or RBOB, recently traded 2.11 cents, or 0.9%, higher at $2.3448 a gallon. May heating oil traded 2.84 cents, or 1.3%, higher at $2.2451 a gallon.

-By Brian Baskin, Dow Jones Newswires; 212-416-2453;
brian.baskin@dowjones.com.

DJ Asian Crude Palm Oil Ends Down On Profit-Taking, Output

KUALA LUMPUR (Dow Jones)--Crude palm oil futures on Malaysia's derivatives exchange ended lower Monday, as profit-taking and liquidation of long positions washed away earlier gains, trade participants said.

Weak buying interest in the cash market due to a public holiday in China, a major buyer of palm oil, and expectations of a continued increase in CPO output in April damped market sentiment.

The benchmark June contract on the Bursa Malaysia Derivatives ended down MYR29, or 1.1%, at an intraday low of MYR2,530/ton.

"When prices couldn't breach resistance at MYR2,590/ton, some investors liquidated their positions," a Malaysia-based trading executive said.

Supply-demand fundamentals are also a tad bearish, as CPO output may rise further in April, a senior executive from a Kuala Lumpur-based brokerage said.

The Malaysian Palm Oil Board is expected to issue data on exports, production and end-month stocks for March next Monday.

March end-month inventories are expected to rise due to increases in both local output and imports from Indonesia, after falling 10.9% in February to 1.79 million tons. March CPO production rose between 7% and 15% from the previous month, trade participants and planters said.

The ringgit has also risen to its highest level against the dollar since July 2008. The currency's strength weighs on futures because it makes CPO more expensive for refiners and narrows their profit margins.

In the cash market, palm olein for May/June shipment was offered $2.50 higher at $815.0/ton.

Cash CPO for prompt delivery was offered MYR20 lower at MYR2,580/ton.

Open interest on the BMD was at 78,028 lots, down from 83,116 lots Friday. One lot is equivalent to 25 tons.

Some 17,008 lots were traded versus 7,175 lots traded Friday.


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

Month      Close    Previous   Change    High    Low 
Apr 2010   2,579    2,605      Down 26   2,624   2,579 
May 2010   2,541    2,571      Down 30   2,595   2,541 
Jun 2010   2,530    2,559      Down 29   2,588   2,530 
Jul 2010   2,522    2,546      Down 24   2,578   2,522 

-By Shie-Lynn Lim, Dow Jones Newswires; +603 2026 1233;
shie-lynn.lim@dowjones.com

CPO futures -- RM2,570 level faces challenge

OBSERVATIONS: The Kuala Lumpur crude palm oil futures market traded within a narrow RM2,500-RM2,570 band last week. But technical indicators suggest this market is poised to stage a breakout above the upper parameter of that trading band.

This market swooped in early trade last week to a low of RM2,501, which is as good as having hit the initial target of RM2,500 a tonne, But short-covering soon emerged to lift the market, enabling it to recover all of its earlier losses - and more - before the week was out. The benchmark June 2010 contract settled last Friday at RM2,559, up RM25 over the week.

Prevarication hampered the market from making much headway last week, up or down. That's because retail players were undecided as to whether the positives outweighed the negatives - or vice-versa.
The one big positive last week was the export estimates for March. Export monitors Societe Generale de Surveillance and Intertek Agri Services put March 2010 exports at a total comibined average of 1.35 million tons, higher than that for February by some 118,000 tonnes or 9.60 per cent, thanks to a bulge in demand from China and India.

The other positive is the biofuel factor: the rise in the price of crude oil to a 18-month high above US$85 a barrel.


The one big negative is industry expectation for a record high South American soyabean harvest.
Conclusion: This market looks poised to stage a breakout above the RM2,570 overhead resistance level. The reason: the substantial 5.88 per cent increase in the total open position to 83,116 open contracts from the previous week's 78,501 suggests that the smart money - or the people in the know and privy to market sensitive information - have bought a substantial amount of long (buy) positions with, of course, a view to profit.

- BUSINESS TIMES