Crude palm oil futures on Malaysia's derivatives exchange ended lower Friday, tracking declines in regional commodities as indications that the U.S. Federal Reserve could rein in stimulus program as early as this year dented sentiment.
The benchmark March contract on Bursa Malaysia Derivatives ended 0.3% lower at 2,467 ringgit a metric ton after moving in a MYR2,462-MYR2,495/ton range.
Most commodities as well as regional equities fell minutes after the U.S. Federal Open Market Committee's last policy meeting released Thursday showed policymakers were divided on whether or not to continue its bond-buying program.
Sentiment remained cautious as investors await export estimates for Jan. 1-10 shipments to gauge whether Malaysia's new export tax on palm oil has helped to boost demand and in turn, reduce inventories.
Both cargo surveyors Intertek Agri Services and SGS (Malaysia) Bhd., issue Jan. 1-10 shipment data on Thursday.
"The concern is that the positive impact from Malaysia's export tax change could be offset by reduced shipments to China due to Beijing's new quality control rules," a commodities broker at a foreign brokerage said.
Major palm oil importer China said it won't accept imports of edible oils containing excessive peroxide or stearic acid from Tuesday, according to China's Inspection and Quarantine Bureau.
China's new rule could "result in weaker CPO prices for palm oil producers due to lower demand from the country. At the same time, it could also lead to potential shortages of palm oil in Chinese markets if exporters find it hard to meet the [new] technical specifications," said Ivy Ng, an analyst at CIMB Investment Bank.
"For every 5% reduction in annual palm oil exports to China, we estimate it could boost stock levels by 175,000 tons" in Malaysia, she said in an note. China consumes over six million tons of palm oil each year and sources more than half of its requirement from world's no. 2 producer Malaysia.
In the cash market, refined palm olein for January shipment was offered at $815/ton, while cash CPO was offered at MYR2,290/ton.
Open interest on the BMD was 166,054 lots, same as Thursday. One lot is equivalent to 25 tons.
A total of 32,188 lots of CPO were traded versus 36,244 lots Thursday.
Ending BMD CPO futures prices in MYR/ton: Month Close Previous Change High Low Jan'13 2,369 2,364 +5 2,390 2,346 Feb'13 2,425 2,439 -13 2,461 2,423 Mar'13 2,467 2,475 -7 2,495 2,462 Apr'13 2,504 2,510 -6 2,527 2,498