Sunday, July 22, 2012

Weekly Crude Palm Oil Report 22 2012

Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives ended the week slightly lower due to the continuous fall in exports demand and the anticipation of higher palm oil production in July.

The benchmark FCPO October contract fell RM23 or 0.75 per cent to close at RM3,042 per tonne on Friday from RM3,065 per tonne last Friday.

The trading range for the week was from RM2,986 to RM3,161.

Total volume traded for the week amounted to 150,321 contracts, down 3,416 contracts from the previous week.

The open interest as at Thursday decreased to 103,992 contracts from 94,948 contracts the previous Thursday.

Cargo surveyor ITS released the palm oil export fi gures for the period of July 1 to 20 on Friday at 764,273 tonnes, a plunge of 22.95 per cent while another surveyor SGS at 768,555 tonnes, a dive of 22.89 per cent from the same period last month.

Most of the fall in exports demand was due to the sharp drop in exports to China while the demand from the Muslim countries like Pakistan, India and Middle East were seem slowing down, approaching the fasting month which would start from this weekend onwards.

Some traders anticipated the palm oil production in July would start increasing until October as we had entered the high production cycle for palm oil during this time of the year.

With the poor performance from the exports demand recently, the palm oil stocks would be expected to increase from July onwards.

However, we expected the increase in palm oil production would not be high as the productivity of the workers in the fi eld would be low entering the fasting month and thereafter most of the workers would be away celebrating the Muslim festival a month later.

The continuous hot and dry weather in the US had started to cause damage to some of the corn and soybean crops in certain areas.

Based on some weather forecast reports, the hot and dry weather pattern would be expected to persist especially in the central and western Midwest until early of August while limited and scattered rains would appear in the northern and eastern Midwest.

The US Department of Agriculture (USDA) released its weekly crop progress report on Monday saying that 31 per cent of corn crop was in good to excellent condition as of Sunday, declining from 40 per cent the previous week while soybean crop was 34 per cent in good to excellent condition, reducing from 40 per cent the previous week.

The above factors had widened the palm oil discount against the soybean oil prices from the usual US$100 per tonne to above US$230 per tonne lately and some traders expected this spread to further widen to US$300 per tonne if the weather condition in the US kept worsening.

Technical View
We maintained our view that the palm oil market would be strongly supported at RM2,970 to RM3,000 levels and will have the tendency to rally once the consolidation phase has completed.

The market would be expected to be volatile in the coming weeks especially weather is the main factor driving the price movement.

Resistance would be pegged at RM3,193 and RM3,270 while support was set at RM2,970 to RM3,000.

Major fundamental news this coming week
Malaysian export data for July 1-25 by ITS and SGS on July 25.

Courtesy of OPF

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