Weekly Crude Palm OIl Report November 4 2012

Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives ended the week sharply lower on concern over record high palm oil stocks for October in Malaysia.

The benchmark FCPO January contract plunged RM107 or 4.11 per cent to close at RM2,496 per tonne on Friday from RM2,603 per tonne last Thursday.

The trading range for the week was from RM2,490 to RM2,553.

Total volume traded for the week amounted to 159,935 contracts, up 32,109 contracts from the previous week.

The open interest as at Thursday increased to 133,402 contracts from 130,058 contracts the previous Thursday.

The palm oil stocks in Malaysia were expected to hit record high in October, ranging from 2.6 million to 2.65 million tonnes.

Although the palm oil exports showed an improvement, however it was unable to offset the strong production in October.

The palm oil production in October was estimated to fall about five per cent to around 1.9 million tonnes while the exports from both cargo surveyors, ITS and SGS, indicating to be in the range of 1.57 million to 1.6 million tonnes.

Cargo surveyor ITS released the palm oil export figures for the full month of October on Wednesday at 1,600,545 tonnes, a rise of 10.85 per cent while another surveyor SGS at 1,567,112 tonnes, an increase of 9.3 per cent from the same period last month.

The majority of the palm oil exports went to European Union countries and India.
On the other hand, the Indonesian government announced on Monday that they will cut its export tax for crude palm oil from 13.5 per cent in October to nine per cent for November.

The reduce in Indonesian palm oil export tax had further increased the toughness for the Malaysian suppliers to be competitive in the international palm oil trading compared with their Indonesian rivals.

In addition, the US soybean prices were also under selling pressure as some analysts estimated the US soybean crop and yield turning out to be better in the coming US Department of Agriculture’s report.
There will be an industry conference in Guangzhou, China on November 7 to 8 where the experts and analysts in the industry would give their view on the market outlook for oils and grains in 2012/13.

On the economic front, the official manufacturing data in China turned out to be better at 50.2 in October, showing an expansion in their manufacturing activities.

This was a good sign for the economic recovery in China.

However, the latest economic and jobs data in Europe remained weak.

There will be a Group of 20 (G20) meeting for the world finance ministers and central bank governors in Mexico this weekend to address the financial issues like the European debt crisis, the US fiscal cliff and the Japan’s debt problems.

Traders would also be focussing on the US presidential election and the meeting of top leaders in China next week.

Technical View
The benchmark January contract finally retraced this week and would be expected to continue the final wave down to form the bottom of the whole downtrend.

We expect the bottom would be set anytime in November and thereafter will form a strong base for the coming uptrend.

Resistance would be pegged at RM2,634 and RM2,755 while support was set at RM2,361 and RM2,230.

Major fundamental news this coming week
Reuters poll on the Malaysian supply and demand in October.

- Courtesy of OPF-