Sunday, September 23, 2012

Weekly Crude Palm Oil Report September 23 2012

Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives dived this week following the sharp plunge in US soybean prices, the anticipation of rising palm oil stocks and the continuation of weak economic data in China.

The benchmark FCPO December contract plunged RM174 or 5.93 per cent to close at RM2,762 per tonne on Friday from RM2,936 per tonne last Friday.

The trading range for the week was from RM2,755 to RM2,894.

Total volume traded for the week amounted to 184,766 contracts, down 14,365 contracts from the previous week.

The open interest as at Thursday increased to 131,290 contracts from 120,285 contracts the previous Thursday.

Crude palm oil prices opened the week sharply lower after the long weekend break, following the daily down-limit in soybean prices on Monday.

The soybean complex prices were under tremendous selling pressure this week due to the on-going US harvest and the anticipation of better US soybean yields.

The weekly crop progress report released by US Department of Agriculture (USDA) on Monday indicated the soybean crop harvest was reported 10 per cent complete, advancing from four per cent the previous week and was well above the average harvest of four per cent for the past five years.

This had driven the funds that were holding large amount of long positions in soybean complex to exit their positions and triggered some speculative selling as well.

The favourable weather in Brazil this month allowed the farmers to start an early soybean planting for their harvest in 2013 also added to the selling pressure.

The preliminary manufacturing data in China for September was showing further contraction for the consecutive of 11-month which may dampen the demand for the global commodities from the world second largest economy.

Cargo surveyor ITS released the palm oil export figures for the period of September 1 to 20 on Thursday at 928,110 tonnes, a jump of 14.61 per cent while another surveyor SGS at 900,450 tonnes, a surge of 12.78 per cent from the same period last month.

The strong export demand failed to turn around the weak market sentiment in palm oil as some traders expected the high production in September would be more than enough to offset the strong demand, leading to rising palm oil stocks which could cross more than 2.2 million tonnes.

Most traders would be waiting for the views from the top industry analysts such as Dorab Mistry, Thomas Mielke and Dr.James Fry on the price outlook for edible oils in year 2012/13 during an industry conference in Mumbai, India from September 22 to 23.

Technical View
The benchmark December contract broke all the major supports and was under significant selling pressure.
The latest chart development painted a bearish view on palm oil prices especially the price broke RM2,820 level and tested the low of RM2,755, a level not seen since October 2011.

If the palm oil prices further broke the RM2,754 level, it will attract more technical selling and long liquidation which may further push the market down for another few hundred ringgit.

The rise above RM2,820 level will pull the market back to sideway consolidation mode.
Resistance would be pegged at RM2,820 and RM2,989 while support was set at RM2,754 and RM2,520.

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

-Courtesy of OPF-

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