Crude Palm Oil Ends Down; Declining CPO Output Limit Fall

Crude palm-oil futures on Malaysia’s derivatives exchange fell Friday and headed for a weekly decline of 4% as Malaysian export demand falls.

The benchmark March contract at Bursa Malaysia Derivatives ended 0.9% lower at 2,366 ringgit a metric ton after falling as much as 2.3% to MYR2,332/ton.

The latest palm-oil export estimates by cargo surveyors Intertek Agri Services and SGS (Malaysia) Bhd. show a slump in shipments to big consumer China which reflect exporters' reluctance to ship cargoes because of uncertainty about China's new quality-control rules.

China won't accept imports of edible oils containing excessive peroxide or stearic acid from Tuesday, according to China's Inspection and Quarantine Bureau.

Palm-oil inventory levels in December hit a high of 2.53 million tons. But analysts expect stocks to ease in the coming months as CPO output continues to decline during the January-March period as a result of seasonal factors.

"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," Alvin Tai, senior plantation analyst at Kuala Lumpur-based OSK Investment Bank, 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," he said. "We should see the effects the next one to two months," he said.

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.

Open interest on the BMD was 173,776 lots versus 170,416 lots Thursday. One lot is equivalent to 25 tons.

Ending BMD Crude Palm Oil (CPO) futures prices in MYR/ton: 
 
Month   Close  Previous  Change   High    Low 
Jan'13  2,260     2,275     -15  2,255  2,251 
Feb'13  2,330     2,339      -9  2,326  2,298 
Mar'13  2,366     2,387     -21  2,377  2,332 
Apr'13  2,395     2,419     -24  2,411  2,356 

Write to Shie-Lynn Lim at shie-lynn.lim@dowjones.com

(END) Dow Jones Newswires

January 11, 2013 05:47 ET (10:47 GMT)

Copyright (c) 2013 Dow Jones & Company, Inc.

Weekly Crude Palm Oil Report January 6 2013

Crude palm oil futures (FCPO) on Bursa Ma­laysia Derivatives de­clined this week due to lower palm oil export demand for December and the prospect of larger soybean production in South America.

The benchmark FCPO March contract fell RM27 or 1.08 per cent to close at RM2,467 per tonne on Friday from RM2,494 per tonne last Friday.

The trading range for the week was from RM2,433 to RM2,524.

Total volume traded for the week amounted to 145,262 contracts, up 39,662 contracts from the previous week.

The open interest as at Thursday decreased to 164,839 contracts from 166,198 con­tracts the previous Thurs­day.

The crude palm oil prices wrapped up the year in a 21 per cent decline in 2012 compared to a 16 per cent fall in 2011 due to record high palm oil stocks, strong production and slug­gish export demand.

The US soybean oil prices on the other hand fell five per cent in 2012, lesser than the 10 per cent decline in 2011 as the US experienced the worst drought in 56 years during summer.

The NYMEX crude oil prices was also facing the same fate as other commodities and was down seven per cent in 2012 against the gain of eight per cent in 2011 due to a slower global economic growth.

Cargo surveyor ITS re­vealed its palm oil export figures for the full month of De­cember on Monday at 1,568,510 tonnes, a drop of 5.69 per cent while another surveyor SGS at 1,518,750 tonnes, a fall of 7.85 per cent from the same period last month.

The growth in exports for December was mainly contributed by India and Pakistan.

However, the slump in demand from China, Euro­pean Union countries and the US was far exceeded the increase in demand from India and Pakistan.

Hence, the exports data for the first 10 days in January will be an important indica­tion as to see the response of the demand after the imple­mentation of zero per cent export tax for crude palm oil in January by the Malaysian government.

In addition, traders would also monitor the impact on palm oil demand from China after the Chinese govern­ment has imposed stricter quality standards on the imported edible oils starting from January 1.

The weather in South America was forecasted to be favourable in the com­ing week.

Some analysts also esti­mated the US Department of Agriculture (USDA) to raise its soybean production in 2012 and to expect a record high of soybean crops in Bra­zil in the coming report.

All these factors would pressure on soybean prices and may dampen the upward momentum of crude palm oil prices.

On the economic front, the US government has finally averted the fiscal cliff issue at a very last minute before the New Year.

Technical View

The benchmark March contract consolidated this week and was waiting for clearer direction from the major fundamental reports to be released next week.

The EMA 50 and the up­trend channel support line will be closely monitored as to determine the strength of the current upward mo­mentum.

Resistance would be pegged at RM2,615 and RM2,755 while support was set at RM2,430 and RM2,350.

Major fundamental news this coming week

MPOB’s monthly supply-demand report on January 10, Malaysian export data for January 1 to 10 by ITS and SGS on January 10 and USDA’s monthly supply-demand report on January 11.

Palm Oil Advances as Malaysia’s Export Tax May Boost Shipments

Palm oil advanced on speculation that a new export tax structure in Malaysia, the second largest producer, will help to boost shipments in the first quarter, paring record stockpiles. 

The contract for March delivery climbed as much as 0.9 percent to 2,495 ringgit ($819) a metric ton on the Malaysia Derivatives Exchange, and ended the morning session at 2,481 ringgit. Futures are heading for a 0.6 percent loss this week. 

Malaysia said Dec. 17 it will allow crude palm oil exports at zero duty in January as the second-largest producer seeks to reduce stockpiles that drove prices to a three-year low last month. Futures lost 23 percent last year as inventories gained for five straight months, reaching a record 2.56 million tons in November, according to the Malaysian Palm Oil Board. 

“The most important thing people are paying attention to is how exports are going to be for January, February and March,” said Chandran Sinnasamy, head of trading at LT International Futures Sdn. in Kuala Lumpur. “Export estimates from Intertek and SGS on the 10th may give a rough idea whether the exports have improved with the new tax in Malaysia.” 

Exports fell 5.7 percent to 1.57 million tons in December from 1.66 million tons a month earlier, surveyor Intertek said Dec. 31. Shipments dropped 7.9 percent to 1.52 million tons in the same period, Societe Generale de Surveillance estimated. Palm oil will trade sideways as concerns over high stockpiles in Malaysia and Indonesia still weigh on the market, said Chandran. 

Palm oil for May delivery advanced 1.4 percent to 7,022 yuan ($1,127) a ton on the Dalian Commodity Exchange. Soybean oil for May rose 1.5 percent to 8,740 yuan a ton. 

Soybeans for March delivery gained 0.3 percent to $13.9025 a bushel on the Chicago Board of Trade. Soybean oil for delivery in March was little changed at 50.68 cents a pound. 

To contact the reporter on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net
 
To contact the editor responsible for this story: Jake Lloyd-Smith at jlloydsmith@bloomberg.net