Weekly Crude Palm Oil Report November 18 2012

Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives soared this week due to the lower than expected palm oil stocks build-up in October.

The benchmark FCPO February contract surged RM113 or 4.88 per cent to close at RM2,429 per tonne on Friday from RM2,316 per tonne last Thursday.

The trading range for the week was from RM2,220 to RM2,439.

Total volume traded for the week amounted to 114,447 contracts, down 84,482 contracts from the previous week.

The open interest as at Wednesday increased to 139,876 contracts from 138,208 contracts the previous Thursday.

MPOB released its bullish monthly reports on Malaysian palm oil’s supply and demand for October 2012 on Monday with palm oil stocks were slightly higher at 2.509 million tonnes, an increase of 1.11 per cent from the previous month and was far below the average estimation of the Reuter’s poll at 2.67 million tonnes.
The exports in October jumped 16.16 per cent to 1.758 million tonnes while the palm oil production reduced 3.28 per cent to 1.938 million tonnes.

The high palm oil exports were mainly contributed by the European Union countries with an increase of 70 per cent in their palm oil imports in October compared with the previous month.

The higher exports demand and lower production growth managed to slowdown the build-up in palm oil stocks in October.

If this trend continues in the coming month, the palm oil stocks will start turning down from the record high levels.

Cargo surveyor ITS released its latest palm oil export figures for the period of November 1 to November 15 on Friday at 769,087 tonnes, a slip of 0.06 per cent from the same period last month.

The exports growth in the last five days of November was sluggish probably due to two public holidays this week.

The Malaysian market was closed on Tuesday and Thursday, celebrating Deepavali and Awal Muharram respectively.

However, both cargo surveyors, ITS and SGS released good export data for the first ten days of November.
ITS indicated the export figures for the period of November 1 to November 10 on Monday at 518,688 tonnes, a surge of 15.62 per cent while another surveyor SGS at 514,798 tonnes, a jump of 22.35 per cent from the same period last month.

The rise in palm oil exports this month was mainly contributed by China as the Chinese importers were scrambling to stock up the refined palm products before the Chinese government implements stricter specifications on refined palm oil’s quality effective from January 1, 2013 onwards.

The increase in exports to China would be expected to extend until the end of this year with the estimation of more than 700,000 tonnes of palm oil would be exported to the country each month in November and December.

Technical View
The benchmark February contract surged this week after the market briefly broke the low of RM2,230 to reach the new low of RM2,220.

Thereafter, the market rebounded more than RM200 from the new low due to short covering activities.
In our view, the market is currently forming a bottom for the next rally.

Resistance would be pegged at RM2,490 and RM2,634 while support was set at RM2,220 and RM2,130.

Major fundamental news this coming week
Malaysian export data for November 1 to November 5 by SGS on November 19 and the export figure for November 1 to November 20 by ITS and SGS on November 20.

- Courtesy of OPF-

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-

Weekly Crude Palm Oil Report October 28 2012

Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives ended the week higher on better export demand and short covering activities ahead of long holidays in Malaysia.

The benchmark FCPO January contract surged RM102 or 4.08 per cent to close at RM2,603 per tonne on Thursday from RM2,501 per tonne last Friday.

The trading range for the week was from RM2,497 to RM2,615.

Total volume traded for the week amounted to 127,826 contracts, down 71,522 contracts from the previous week.

The open interest as at Wednesday increased to 126,334 contracts from 125,799 contracts the previous Thursday.

Cargo surveyor ITS released the palm oil export figures for the period of October 1 to 25 on Thursday at 1,300,495 tonnes, a rise of 11.09 per cent while another surveyor SGS at 1,280,652 tonnes, an increase of 9.45 per cent from the same period last month.

On the supply side, some traders estimated the palm oil production in October would be slightly down to about five per cent.

The production during the fourth quarter 2012 should be toppish especially approaching the monsoon season end of the year.

An industry group in Indonesia indicated that the Indonesian government may cut its export tax for crude palm oil from 13.5 per cent to 10.5 per cent for November in its monthly adjustment for the export duty.
This may counter the effect by the Malaysian government to reduce its export tax for crude palm oil in its recent announcement.

The weekly crop progress report released by US Department of Agriculture on Monday indicated the soybean crop harvest was reported 80 per cent complete, advancing from 71 per cent from the previous week.

On the economic front, the manufacturing industry in China showed improvement with the data released on Wednesday was better than the market expectation.
This boosted the hope that the world second largest economy is recovering, and soon to demand for more commodities.

In addition, the US economic growth was also pointing to recovery with the latest third quarter gross domestic product data released was at two per cent, higher than the average analysts’ estimation of 1.8 per cent.

The coming November would be an interesting month as the world’s largest two economies, the US would be having presidential election, while China is in the transition of changing the country’s leader.
This may give lots of uncertainties and volatilities to the market movement towards the end of the year especially the measurements on the US financial fiscal cliff by the new president and the new policies by the new leaders to boost their country’s economy.

Technical View
The benchmark January contract continued to surge this week after the market broke the RM2,530 resistance.

Market is currently remained in the uptrend channel with strong resistance to be met in between RM2,634 and EMA50 line.

Focus would be put at this range as to see whether the market manages to break further up? We believe the market is going to correct soon before forming a strong base for the next uptrend.

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