Friday, January 18, 2013

Market Intelligence Crude Palm Oil 18th January, 2013

Market Intelligence

CPO closed with mild gains in domestic stop markets on rising demand. Fresh positions were created by speculators in futures market on the back of a firming trend in the domestic market and a pick up in demand mainly. The government enhanced import duty on Crude Edible Oils, while retaining the present import duty on all Refined Edible Oils. This has been done with the objective to shore up the price payable to farmers for Fresh Fruit Bunches of Oil Palm, which is linked to the landed price of CPO. With enhanced duty on CPO, price payable to farmers will increase by around Rs. 150 per MT. Impact of enhanced duty on prices of Edible Oils would be negligible at less than Rs. 1 per kg. The price may be further moderated on account of the huge stocks of Palm Oil in Malaysia and Indonesia, which may force these countries to lower the export duty currently levied in an effort to boost their exports. The CCEA also approved a plan to de freeze the tariff values of all Edible Oils including Palm Oil and notify their tariff values on the basis of their prevailing international prices. An alignment of notified tariff values with international prices will have a positive impact on the duty collected from import of Edible Oils and will provide an even field to the domestic refining industry.

In international markets CPO eased initially reacting to India's import duty structure on Crude Palm Oil imports, a move which is considered will hurt demand and leave stocks near record highs. However, prices recovered from lower levels on short covering by traders and speculators ahead of weekend. India, yesterday set a 2.5 % import duty on Crude Edible Oils to stem imports and protect domestic Oilseed growers. Some traders believe that the duty may be too small to really have an impact on Crude Palm Oil demand. The impact of higher duty was minimal in the local market as traders expect that Malaysia and Indonesia may be forced to lower export duty to clear stockpiles. Slightly better than expected economic data from China also acted as a positive cue and capped prices on downside. China's Q4 GDP growth data showed a 7.9% on-year rise vs expectations of 7.8% growth. Investors have shifted attention now to the South American weather pattern. Concerns over dry weather in major Soybean producer Argentina will likely support rival Palm Oil's prices.

Malaysia and Indonesia, are struggling with record stocks since September due to tepid global economic conditions and the euro zone crisis, which have stifled demand and caused prices to tumble in recent past. End stocks are expected to slowly shrink in the first quarter of this year on the back of seasonally slowing production, sluggish exports could crimp any recovery in prices. CPO prices in domestic markets are likely to decline in near term as demands from Indian refiners are probably going to decline. But the downside may not be significant because Palm Oil is still far cheaper than alternatives.

News for Use
At current prices Refined Palm products are offered $350-$370/ton cheaper than rival Soy Oil and a hefty $400/ton discount to Rapeseed Oil.

Events to Watch

January 1-20 export estimates by cargo surveyors Intertek Agri Services and SGS (Malaysia) Bhd. due on 21st January, 2013.

Market Intelligence Crude Palm Oil 17th January, 2013

Market Intelligence

CPO prices in the domestic markets remained steady paring recent gains as speculators offloaded their positions, taking negative cues from overseas. In international markets, Palm Oil declined on concerns that inventories may stay near record levels as exports dropped and India imposes to tax imports to protect local growers. CPO in futures market eased from recent highs due to a lack of buying momentum and concern about Refined Palm Oil shipments to China.

CPO prices fell immediately after India imposed a 2.5% import tax on Crude Edible Oils in a bid to protect its farmers against a surge of cheap imports. Investors turned bearish on Palm Oil after India's import tax announcement on concerns that this could slow export demand and keep Palm Oil stockpiles near record levels. Malaysian Palm Oil stockpiles at end-December reached an all-time high. Still, some traders are hopeful that India's tax imposition may not be completely negative for Malaysia. Palm Oil prices tumbled from highs as inventories in Indonesia and Malaysia surged because of low demand amid an economic slowdown in China and Europe. Investors locked in profits after steady gains in prices. Traders also took cues from hints of recovering demand from major buyers as temperatures become warmer and more suitable for Palm Oil.

Indian government has decided to lift a freeze on the taxable value of Edible Oils including CPO. India will revise the base price used to calculate import taxes for CPO on a fortnightly basis now onwards as result of this revision. The current base price for CPO is unchanged from last six years. The Cabinet has approved to de freeze the tariff values of all Edible Oils including Palm Oil & Soy Oil and notify their tariff values on the basis of their prevailing international prices. An alignment of notified tariff values with international prices will have a positive impact on the duty collected from import of Edible Oils and will provide an even field to the domestic refining industry.

Indonesia, will not change its export tax structure for the Edible Oil or follow rival producer Malaysia by cutting tariffs on crude grades to zero. The Malaysian tax changes were aimed at clawing back market share from Indonesia. Rising inventories would increase pressure on Indonesia to cut its export tax to compete with Malaysia. If the government cuts the export tax, it will definitely help boost shipments. Attempts by Indonesian exporters to cut reserves are hampered by the zero tariff in Malaysia, causing inventories to stay high.

Palm Oil is expected to rebound, as investors likely to square off riskier positions ahead of the weekend. However, in longer view traders are still cautious on concerns of stock piles.

News For Use

JPMorgan cut its Palm Oil price forecast by 10 % to 2,600 Ringgit a ton for 2013-2014 from 2,900 a ton earlier, citing an overhang of inventories.

Vietnam is considering putting emergency import tariffs on Soy Oil and Palm Oil to prevent a flood of imports damaging its own producers. Under WTO rules, countries may temporarily impose such tariffs known as "safeguard measures" if they can show that there is a serious threat to domestic producers.

Wednesday, January 16, 2013

Market Intelligence Crude Palm Oil 16th January, 2013

Market Intelligence

CPO climbed on speculation that stockpiles in Malaysia may drop from a record as output falls and demand recovers in India and Pakistan. Rising imports from India supported Palm Oil prices at a time when demand from China is being affected by new quality control rules. Cooking Oil imports by India jumped last month after a decline in prices of the tropical commodity and domestic Oilseed supplies spurred demand. Heavy discount of Palm products over other Oils and lower domestic production of Vegetable Oils due to slowdown in crushing pushed up the import of Palm products even during the winter season. India's consumption of Palm Oil could rise by 750,000 metric tons in the marketing year that ends Oct. 31, driven by a drop in the prices of the tropical oil and as demand for other vegetable oils eases. India may continue to buy huge quantities of Palm Oil in February also. India is showing escalating interest towards sustainable Palm Oil. The number of Indian RSPO members, has increased over five times from 2011 to 2012 comprising leading players within the Palm Oil sector in India.

Malaysia will allow shipments of the Crude Oil at zero duty for another month in February as it seeks to reduce inventory. Indonesia will not aggressively slash its CPO export tax as an effort to boost competition with Malaysia as the number of raw Palm Oil exported by the country to overseas was small. Indonesia has set up a progressive Palm Oil export structure in line with policy to boost the Palm Oil downstream industry. Increased competition from Indonesia may erode Malaysian exports, while benefiting importers such as India, China and Pakistan.

Thai Oil Palm and Palm Oil exports are in trouble, as shipments of local products are less competitive because of high prices as a result of the government's price intervention scheme. Demand also remains weak there as the economy has yet to fully recover. Fresh Palm nut prices in Thailand tumbled to only two baht per kg due to oversupply, caused by unusually wet weather that boosted output.

Palm Oil prices are likely to remain firm in future on increasing demand. Palm Oil's large discount to rival Soy Oil and increased competitiveness of Malaysia's downstream Palm Oil sector which will help to drive demand.

News For Use

Officials from China's food safety to visit Malaysia at the end of January to shed light on new quality control rules imposed by the country. The visit will give some clarity to Malaysian refiners with businesses in China. Malaysian Palm Oil Board has proposed China to grant a six-month exemption to exporters and refiners to give them time to adjust to the new rules.

Conference on the Global Trends in Sustainable Production and sourcing of Edible Oils to be held on February 1st, 2013 at Delhi.

Sunday, January 13, 2013

Market Intelligence Crude Palm Oil 11th January 2013

CPO traded lower, as investors build short positions in futures due to ample Palm Oil supplies in Malaysia. Further selling pressure is expected as higher than expected CPO output and relatively flat outbound sales pushed stocks to a record high. Palm oil shipments to China surprisingly fell ahead of tighter Chinese quality control rules.

However, some industry experts who expect the average CPO price to drop this year compared with last year are still bullish on the Palm Oil outlook. They see potential for CPO price to strengthen towards the later part of 2013. Any stresses on the global system in the form of weather or diseases can lead to production shortfalls, triggering price explosions. Industry players would be looking more intensely into ways to enhance labor productivity to reduce costs this year. Malaysian exporters are not rushing off to export directly and take advantage of the zero percent tax for this month yet as some planters may continue to sell to local refiners.

Rabobank signaled a downgrade ahead in its forecasts for prices of Palm Oil, which it had rated as its most bullish agricultural commodity for 2013, after Malaysian stocks of the vegetable oil defied market expectations by rising to a fresh record high. The uncertainty around future import demand, particularly to China, has acted to limit upside price moves. Palm Oil prices likely to remain range bound in coming weeks until a seasonal slowdown in Palm Oil production is likely seen in March. The downside in prices is also limited on account of the discount of Palm Oil prices to those in rival vegetable oils. In the medium-to-longer term this price discount is unsustainable. And a seasonal slowdown in Palm Oil production is likely to emerge by the end of the first quarter of 2013 which should narrow the price discount to Soy Oil.

Meanwhile, China reported an increase in Palm Oil imports. The demand outlook is being clouded by Chinese legislation on the use of retail Edible Oil blends, and lower reported per-store sales by major food service companies in the second half of 2012. Thailand, likely produce a record Crude Palm Oil output this year. While the record output will put some pressure on prices in the market, rising demand for bio diesel made from Palm Oil will underpin price levels.

According to Alvin Tai, senior plantation analyst at Kuala Lumpur-based OSK Investment Bank, the downside for CPO prices is relatively limited given parity to Brent crude prices which will help trigger demand for use in the energy sector. Additionally he said Malaysia's move to cut the tax on CPO exports and abolish a duty-free shipment quota from the beginning of January will have some positive impact on CPO shipments, and we should see the effects the next one to two months.

For the week ahead investors are likely to monitor export trends during the Jan 1-15 period to see whether a new tax rate has helped boost orders. Malaysia is scheduled to announce its February CPO export-tax rate on Tuesday.

Weekly Crude Palm Oil Report January 13 2013

Crude palm oil futures (FCPO) on Bursa Ma­laysia Derivatives plunged this week due to bearish fundamental reports released during the week.

The benchmark FCPO March contract tumbled RM101 or 4.09 per cent to close at RM2,366 per tonne on Friday from RM2,467 per tonne last Friday. The trading range for the week was from RM2,332 to RM2,476.

Total volume traded for the week amounted to 233,652 contracts, up 88,390 contracts from the previous week.

The open interest as at Thursday increased to 173,776 contracts from 164,839 con­tracts the previous Thurs­day.

MPOB released its bearish monthly reports on Malaysian palm oil’s supply and demand for December 2012 on Thurs­day with palm oil stocks were continuously higher at 2.628 million tonnes, an increase of 2.41 per cent from the previous month and was far above the average estimation of Reuter’s poll at 2.5 million tonnes.

According to the report, the exports in December dropped slightly 0.70 per cent to 1.65 million tonnes while the palm oil production reduced 5.86 per cent to 1.78 million tonnes.

Although the fall in exports was less than the drop in production for December, the absolute figure for production was still higher than the ex­ports, contributing to higher palm oil stocks.

The palm oil demand is seasonally weak during win­ter time as palm oil tends to crystallise in colder weather. On the other hand, the produc­tion was seen falling due to the effect of heavy rains during this time of the year.

Cargo surveyor ITS re­leased the palm oil export figures for the period of January 1 to January 10 on Thursday at 373,462 tonnes, a plunge of 25.27 per cent while another surveyor SGS at 343,081 tonnes, a dive of 33.57 per cent from the same period last month.

The main reason of the weak exports data was due to low demand from top importing countries like China and European Union countries.

Both countries’ imports slumped 58 per cent and 67 per cent respectively during the first 10 days of January compared with the same period last month.

Most Chinese importers were abducting the wait and see attitude as to monitor the impact of the stringent quality on imported palm oil products by the Chinese government.

In addition, the effect of zero per cent export tax on crude palm oil by the Malaysian government has yet to boost any demand for the tropical oil.

The Malaysian govern­ment is expected to reveal its crude palm oil export tax for February next Tuesday.

Meanwhile, USDA re­leased its monthly report on soybean supply and demand on Friday with US soybean production for 2012 was estimated at 3.015 billion bushels, up from 2.971 billion in the previous report.

Technical View

The benchmark March contract broke all the major supports this week espe­cially piercing through the uptrend channel support and EMA 50 line easily on Monday.

The unsustainability to stand above EMA 50 sup­port has pushed the market back to sideway trend in the medium term until further new development in the fundamental factors.

The benchmark contract will change from March to April month next Wednes­day. Resistance was pegged at RM2,430 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 January 15 by ITS and SGS on Janu­ary 15.

-Courtesy of OPF-