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
