Weekly Crude Palm Oil Report September 23 2012

Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives dived this week following the sharp plunge in US soybean prices, the anticipation of rising palm oil stocks and the continuation of weak economic data in China.

The benchmark FCPO December contract plunged RM174 or 5.93 per cent to close at RM2,762 per tonne on Friday from RM2,936 per tonne last Friday.

The trading range for the week was from RM2,755 to RM2,894.

Total volume traded for the week amounted to 184,766 contracts, down 14,365 contracts from the previous week.

The open interest as at Thursday increased to 131,290 contracts from 120,285 contracts the previous Thursday.

Crude palm oil prices opened the week sharply lower after the long weekend break, following the daily down-limit in soybean prices on Monday.

The soybean complex prices were under tremendous selling pressure this week due to the on-going US harvest and the anticipation of better US soybean yields.

The weekly crop progress report released by US Department of Agriculture (USDA) on Monday indicated the soybean crop harvest was reported 10 per cent complete, advancing from four per cent the previous week and was well above the average harvest of four per cent for the past five years.

This had driven the funds that were holding large amount of long positions in soybean complex to exit their positions and triggered some speculative selling as well.

The favourable weather in Brazil this month allowed the farmers to start an early soybean planting for their harvest in 2013 also added to the selling pressure.

The preliminary manufacturing data in China for September was showing further contraction for the consecutive of 11-month which may dampen the demand for the global commodities from the world second largest economy.

Cargo surveyor ITS released the palm oil export figures for the period of September 1 to 20 on Thursday at 928,110 tonnes, a jump of 14.61 per cent while another surveyor SGS at 900,450 tonnes, a surge of 12.78 per cent from the same period last month.

The strong export demand failed to turn around the weak market sentiment in palm oil as some traders expected the high production in September would be more than enough to offset the strong demand, leading to rising palm oil stocks which could cross more than 2.2 million tonnes.

Most traders would be waiting for the views from the top industry analysts such as Dorab Mistry, Thomas Mielke and Dr.James Fry on the price outlook for edible oils in year 2012/13 during an industry conference in Mumbai, India from September 22 to 23.

Technical View
The benchmark December contract broke all the major supports and was under significant selling pressure.
The latest chart development painted a bearish view on palm oil prices especially the price broke RM2,820 level and tested the low of RM2,755, a level not seen since October 2011.

If the palm oil prices further broke the RM2,754 level, it will attract more technical selling and long liquidation which may further push the market down for another few hundred ringgit.

The rise above RM2,820 level will pull the market back to sideway consolidation mode.
Resistance would be pegged at RM2,820 and RM2,989 while support was set at RM2,754 and RM2,520.

Major fundamental news this coming week
Malaysian export data for September 1-25 by ITS and SGS on September 25.

-Courtesy of OPF-

Weekly Crude Palm Oil Report September 16 2012

Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives ended the week slightly higher after the US Federal Reserve announced a third round of quantitative easing programmes and the Germany’s top court approved the ratification of the eurozone’s permanent rescue fund.

The benchmark FCPO November contract rose RM9 or 0.31 per cent to close at RM2,936 per tonne on Friday from RM2,927 per tonne last Friday.

The trading range for the week was from RM2,874 to RM2,948.

Total volume traded for the week amounted to 199,131 contracts, up 2,534 contracts from the previous week.

The open interest as at Thursday increased to 120,285 contracts from 114,039 contracts the previous Thursday.

The US Federal Reserve said on Thursday that it would be aggressively buying the securities with unlimited monthly purchases of US$40 billion of mortgage debt until there was improvement in the labour market.
Meanwhile, the German Constitutional Court also permitted Germany to ratify the permanent rescue fund, the European Stability Mechanism (ESM), and the European fiscal treaty on Wednesday in resolving the eurozone debt crisis.

Both good news lifted the global equities and commodities prices on Thursday and Friday.
Cargo surveyor ITS released the palm oil export figures for the period of September 1 to September 10 on Monday at 453,302 tonnes, a jump of 26.84 per cent while another surveyor SGS at 460,939 tonnes, a surge of 29.98 per cent from the same period last month.

The sharp rise in demand this time was mainly contributed by the crude palm oil export to India where the free-tax crude palm oil quota was lifted to additional two million tonnes early last month.

MPOB released its bearish monthly reports on Malaysian palm oil’s supply and demand for August 2012 on Monday with palm oil stocks were continuously higher at 2.115 million tonnes, an increase of 5.81 per cent from the previous month and was slightly above the average estimation of the Reuter’s poll at 2.09 million tonnes.

The exports in August rose 10.05 per cent to 1.427 million tonnes while the palm oil production slipped 1.73 per cent to 1.663 million tonnes.

USDA released its supportive monthly report on soybean supply and demand on Wednesday with soybean ending stocks for 2011/12 fell to 130 million bushels from 145 million bushels while the soybean production was forecasted at 2.634 billion bushels, down from 2.692 billion bushels in the previous report.
Dr James Fry, a leading edible oils analyst, said on Wednesday in a conference in Kuala Lumpur that crude palm oil prices might fall to RM2,450 per tonne in the first quarter of 2013 if brent crude prices drop to US$80 per barrel.

Technical view
The benchmark November contract was firmly supported above the red line and the market would be expected to have limited downside due to lots of good news announced during the week and the wide discount between palm oil and soybean oil prices.

We expect the market will rebound next week at least to cover the gap at RM2,969 to RM2,989 levels.
The benchmark contract will change to December month on Tuesday.

Resistance would be pegged at RM2,989 and RM3,100 while support was set at RM2,874 and RM2,820.

Major fundamental news this coming week
Malaysian export data for September 1 to September 15 by ITS on September 15 and by SGS on September 18 and the export figure for September 1 to September 20 by ITS and SGS on September 20.

-Courtesy of OPF-

Weekly Crude Palm Oil Report September 9 2012

Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives ended the week sharply lower due to the anticipation of higher palm oil stocks level in August and the current US weather condition had stabilised the crop from further deteriorating.

The benchmark FCPO November contract plunged RM92 or 3.05 per cent to close at RM2,927 per tonne on Friday from RM3,019 per tonne last Friday.

The trading range for the week was from RM2,895 to RM3,100.

Total volume traded for the week amounted to 196,597 contracts, up 60,870 contracts from the previous week.

The open interest as at Thursday decreased to 114,039 contracts from 126,836 contracts the previous Thursday.

Most traders liquidated some riskier positions in the palm oil market ahead of the major fundamental reports to be released next week.

A Reuters poll revealed on Wednesday indicating that Malaysian palm oil stocks were expected to increase 4.5 per cent to 2.09 million tonnes in August from the previous month as the high production outpaced the rise in exports.

According to the poll, the palm oil exports were estimated to surge 11.8 per cent to 1.45 million tonnes while the production would fall three per cent to 1.64 million tonnes.

One of the top industry analysts, Dorab Mistry provided his view on palm oil prices during the Global Commodities Conference – Asia 2012 in Singapore on Thursday saying that palm oil prices was hard to be bullish given the record palm oil stocks and high production cycle currently which would be expected to hit new peaks in September and October.

He pegged the palm oil prices to be trading between RM2,900 to RM3,300.

Cargo surveyor SGS released the palm oil export figures for the full month of August on Tuesday at 1,427,052 tonnes, a surge of 19.6 per cent from the same period last month.

Most of the rise in exports was mainly to India and China which showed an increase of 81 per cent and 43 per cent respectively compared with the previous month.

The European Central Bank (ECB) unveiled a new bond-buying program named as Outright Monetary Transactions (OMT) on Thursday to ease the eurozone debt crisis.

The announcement by the ECB immediately pressured the Spain and Italian bond yield and triggered the global equities to surge more than two per cent the same day.

The next focus would be on the Federal Open Market Committee meeting which was scheduled on September 12 to 13 on the possibility of any quantitative easing programs to be announced given the disappointing US jobs data released on Friday.

Technical View
The benchmark November contract was noted to face resistance at RM3,100 level and the inability to rise further from that level especially to cross above the EMA 200 line pressured the palm oil market to fall back forming a more complex consolidation phase which may drag for another couple of weeks before a clearer trend is noted.

The red line support will be closely monitored and more observation needed to see how the chart pattern developed from here.

Resistance would be pegged at RM3,193 and RM3,270 while support was set at RM2,895 and RM2,820.

Major fundamental news this coming week
MPOB’s monthly supply demand report on September 10, Malaysian export data for September 1-10 by ITS and SGS on September 10 and USDA’s monthly supply-demand report on September 12.

Courtesy of OPF