Weekly Crude Palm Oil Report October 21 2012

Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives ended fl at this week, digesting the impact of newly announced export tax structure by the Malaysian government and analysing the mixed views by the top industry analysts during an industry conference on Tuesday.

The benchmark FCPO December contract rose RM1 or 0.04 per cent to close at RM2,501 per tonne on Friday from RM2,500 per tonne last Friday.

The trading range for the week was from RM2,417 to RM2,524.

Total volume traded for the week amounted to 199,348 contracts, down 4,237 contracts from the previous week.

The open interest as at Thursday decreased to 125,799 contracts from 141,841 contracts the previous Thursday.

After the announcement on the new crude palm oil export tax structure by the Malaysian government last Friday, palm oil producers requested the government to reconsider issuing tax-free crude palm oil quota especially to those companies which have refineries overseas.

These companies were depending on the tax-free crude palm oil export quota to maintain the profits of their refineries overseas.

With the abolishment of the tax-free crude palm oil export quota, it would definitely erode some of their gains and competitiveness in other regions.

Dorab Mistry, one of the leading edible oils’ analysts, said in an industry conference on Tuesday that palm oil prices could fall to RM2,200 per tonne within the next four to six weeks due to high palm oil stocks in Malaysia which may exceed three million tonnes by end of this year.

Another renowned analyst, Thomas Mielke, maintained his view that the wide discount between palm oil and other vegetable oils’ prices was unsustainable due to shortage in other vegetable oils supplies which would increase the demand for palm oil to fill the supply gap.

He forecasted palm oil prices to recover to RM3,300 per tonne somewhere in March to May next year.
Another analyst, Dr James Fry, said the premium of palm oil prices over crude oil prices in Europe collapsed from approximately US$300 per tonne at the beginning of this year to nearly par recently could boost the appeal to use palm oil as the feedstock to produce biodiesel.

According to Fry, the narrow price difference between palm oil and crude oil currently would become more feasible to produce biodiesel and direct burning of vegetable oils without any subsidy by the local government.

Cargo surveyor ITS released the palm oil export figures for the period of October 1 to 15 on Monday at 769,534 tonnes, a jump of 13.15 per cent while another surveyor SGS at 768,550 tonnes, a surge of 16.28 per cent from the same period last month.

The Malaysian market will be closed on Friday celebrating Hari Raya Haji.
  
Technical view
The benchmark January contract ended fl at this week and met a strong resistance at RM2,530 level despite strong export growth for the first half of October.

In our opinion, the current rebound may end around this level and the failure to break above RM2,530 level next week will bring palm oil price down again for the last wave to form the bottom of the downtrend.
Resistance would be pegged at RM2,530 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 to October 20 by SGS on October 22 and the export data for October 1 to October 25 by ITS and SGS on October 25.

-Courtesy of OPF-

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-

Weekly Crude Palm Oil Report October 7 2012

Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives continuously tumbled for the third week due to the anticipation of rising palm oil stocks in the coming months.

The benchmark FCPO December contract plunged RM131 or 5.15 per cent to close at RM2,415 per tonne on Friday from RM2,546 per tonne last Friday.

The trading range for the week was from RM2,230 to RM2,560.

Total volume traded for the week amounted to 218,044 contracts, up 25,179 contracts from the previous week.

The open interest as at Thursday decreased to 134,362 contracts from 136,193 contracts the previous Thursday.

Cargo surveyor ITS released the palm oil export figures for the full month of September on Monday at 1,443,836 tonnes, a drop of 0.67 per cent while another surveyor SGS at 1,433,795 tonnes, an increase of 0.47 per cent from the same period last month.

A Reuters poll revealed on Friday that Malaysian palm oil stocks in September were expected to hit a record high at 2.46 million tonnes, a jump of 16.4 per cent from the previous month.

If this figure is realised in the next government monthly reports, it would surpass the previous record of 2.27 million tonnes set in November 2008.

According to the poll, palm oil exports were estimated to increase 5.8 per cent to 1.51 million tonnes while the production would surge 20 per cent to two million tonnes.

With such scenario, the exports growth was too low to offset the sharp rise in production, resulting the palm oil stocks to hit all-time record high.

The weekly crop progress report released by US Department of Agriculture (USDA) on Monday indicated the soybean crop harvest was reported 41 per cent complete, advancing from 22 per cent the previous week.

The soybean harvest in US was progressing well without much weather disruption at this current moment.
Some analysts estimated the US soybean production and yield would turn out to be better in the coming government monthly reports which would be released next week.

Palm oil prices got a lift during mid-week on bargain hunting after the market was deeply oversold.
The tropical oil prices was also supported when Malaysian Plantation Industries and Commodities ministry said on Thursday that they would propose to the cabinet to reduce crude palm oil export taxes from 23 per cent to between eight per cent to 10 per cent.

This move was aimed to position Malaysia to be more competitive in the international palm oil trading compared with the Indonesian rivals and to reduce the current high palm oil stocks level.

However, the hope of cutting crude palm oil export taxes faded when the Malaysian cabinet delayed taking any decision on the proposal on Friday.

Technical View
The benchmark December contract plunged to a new low of RM2,230 this week, a level not seen since November 2009.

We expect the market to fluctuate wildly at the current level with the radius of RM150 range next week.
However, the whole downtrend seemed not completed yet and more observation is needed.

Resistance would be pegged at RM2,570 and RM2,755 while support was set at RM2,393 and RM2,230.

Major fundamental news this coming week
MPOB’s monthly supply demand report on October 10, Malaysian export data for October 1 to October 10 by ITS and SGS on October 10 and USDA’s monthly supply-demand report on October 11.

- courtesy of OPF-