Sunday, October 14, 2012

Weekly Crude Palm Oil Report October 14 2012

Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives ended the week higher in the anticipation of palm oil export tax cut in Malaysia which also spurred technical buying in a deeply oversold condition.

The benchmark FCPO December contract rose RM85 or 3.52 per cent to close at RM2,500 per tonne on Friday from RM2,415 per tonne last Friday.

The trading range for the week was from RM2,361 to RM2,529.

Total volume traded for the week amounted to 203,585 contracts, down 14,659 contracts from the previous week.

The open interest as at Thursday increased to 141,841 contracts from 134,362 contracts the previous Thursday.

The Malaysian government announced on Friday that they would reduce the crude palm oil export taxes and scrapped the current free tax crude palm oil export quota effective from January 1 next year.

The new export taxes would be set based on the price range of crude palm oil in that particular month and the taxes would vary on monthly basis.

The concept of the new export taxes in Malaysia was similar to the Indonesian counterparts as to position Malaysia in a more competitive level in the international palm oil trading compared with Indonesia.

Cargo surveyor ITS released the palm oil export fi gures for the period of October 1 to 10 on Wednesday at 448,624 tonnes, a slip of 1.03 per cent while another surveyor SGS at 420,758 tonnes, a drop of 8.72 per cent from the same period last month.

Malaysia Palm Oil Board (MPOB) released its bearish monthly reports on Malaysian palm oil’s supply and demand for September 2012 on Wednesday with palm oil stocks were sharply higher at 2.481 million tonnes, a jump of 17.43 per cent from the previous month and was slightly above the average estimation of the Reuters’ poll at 2.46 million tonnes.

The exports in September rose 4.49 per cent to 1.506 million tonnes while the palm oil production soared 20.43 per cent to 2.004 million tonnes.

The strong growth in production which was more than four-time faster than the increase in exports demand, pushed the palm oil stocks level to all time record high in September.
The high stocks level was pretty much factored in during the plunge of palm oil prices in the past few weeks.

USDA released its monthly report on soybean supply and demand on Thursday with soybean ending stocks for 2012/13 increase to 130 million bushels from 115 million bushels while the soybean production was forecasted at 2.86 billion bushels, up from 2.634 billion bushels in the previous report.

Even though both soybean production and stocks level were higher than the previous report, most analysts viewed it as supportive as the stock-to-use ratio remained low in 46 years.
The continuous robust soybean demand from China was also the major factor of the above view.

Technical View
The benchmark December contract rebounded this week after the fundamental reports released were very much in tandem with the market expectation.

The benchmark contract would change from December to January month next Tuesday.
We expected the market to have some more room to move upward before tumbling down again to form the bottom of the downtrend.

Resistance would be pegged at RM2,570 and RM2,634 while support was set at RM2,361 and RM2,230.

Major fundamental news this coming week
Malaysian export data for October 1-15 by ITS and SGS on October 15 and the export data for October 1-20 by ITS on October 20.

-Courtesy of OPF-

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