Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives ended the week higher, supported by weather concern in South America and firm soybean oil prices.
The benchmark FCPO April contract rose RM45 or 1.88 per cent to settle at RM2,445 per tonne on Friday from RM2,400 per tonne last Friday.
The trading range for the week was from RM2,404 to RM2,488.
Total volume traded for the week amounted to 146,967 contracts, down 56,208 contracts from the previous week.
The open interest as at Wednesday increased to 185,630 contracts from 182,124 contracts the previous Thursday. The palm oil market rallied during the beginning of the week due to dry weather concerns in South America.
The market participants were very sensitive to any weather change during these few months as the soybean crops in South America are entering the critical planting development phase.
The weather conditions in South America were generally favourable for soybean crops at the beginning of the year.
The weather started to change to hot and dry pattern for the past two weeks drew attention of the market participants.
If timely rains appear in the next two weeks, soybean crops could recover from the current condition.
Some weather forecast reports showed that there would be beneficial rains in South America next week, capping further gains in soybean complex and prompted some speculators to take profits off the table.
On the other hand, Malaysia was also having some weather problems where consistent heavy rains were falling in key palm oil producing states like Pahang and Johor.
These two states alone produced about 30 per cent of the total palm oil production in Malaysia.
There was no serious disruption or damage to the palm oil production at the current moment but close monitoring on the weather pattern would be observed from time to time.
On the demand side, the exports were slowly improving but not strong enough to offset the high production levels.
The exports to top importing countries remained lacklustre especially to the European Union countries due to seasonal factor.
Cargo surveyor ITS released the palm oil export figures for the period of January 1 to 25 on Friday at 1,102,585 tonnes, a drop of 14.11 per cent while another surveyor SGS at 1,104,890 tonnes, a fall of 14.60 per cent from the same period last month.
The Indian government has raised its base price for crude palm oil imports to US$802 per tonne on Wednesday on top of the 2.5 per cent import tax implemented the previous week.
Again, the Indian government’s move was to protect the local industry and to avoid excessive cheap palm oil supplies in their market. The Malaysian markets will be closed on Monday and Friday celebrating Thaipusam and Federal Territory Day respectively.
The benchmark April contract was slowly crawling up this week and the technical indicators were improving to supportive signals.
If the market is able to stand firm above RM2,450 next week, the palm oil prices will have high potential to go up.
If the market is able to further break RM2,490 level, the bull trend may resume in the medium term.
Resistance would be pegged at RM2,450 and RM2,524 while support was set at RM2,330 and RM2,280.
Major fundamental news this coming week
Malaysian export data for January 1 to 31 by ITS and SGS on January 31.
-courtesy of OPF-