Monday, February 4, 2013

Due for Downward Correction Asian Crude Palm Oil Prices

Crude palm oil futures on Malaysia's derivatives exchange were mostly higher Monday as weather-related issues in key soybean growing regions continued to dominate.
The benchmark April contract at Bursa Malaysia Derivatives ended 9 ringgit higher at MYR2,566 a metric ton, after trading in the MYR2,552-MYR2,592/ton range.
CPO futures have risen over 4% from Jan. 25 due to fears of unfavorable weather in major soybean growing regions, including heavy rains in Mato Grosso in Brazil and a shift from extreme wet to dry weather in Argentina, where yields may be affected ahead of pod fill, a Kuala Lumpur-based trader said, adding that the widening differential between soyoil and palm oil is underpinning prices of the latter.
However, CPO prices are headed for a correction as there has been no uptick in demand, market participants said. Export data by cargo surveyors Intertek Agri Services and SGS (Malaysia) Bhd. last week showed lackluster demand, they said.
Intertek said January exports fell 7% from a month earlier to 1.46 million tons while another SGS put shipments at 1.42 million tons, a decline of 6.4%.
Investors are keenly awaiting January palm oil exports and inventory data from the Malaysian Palm Oil Board scheduled early next week.
December palm oil inventories were at a record high of 2.63 million tons. So, a further build-up would be negative for palm oil prices, a Singapore-based trader said.
Investors will also be watching out this week for economic data releases for January from China. The numbers on inflation and trade balance due on Friday could provide cues about the health of the world's second-largest economy and impact commodity prices, including those of palm oil, traders said.
In the cash market, refined palm olein for February was offered at $850/ton, while cash CPO was offered at MYR2,450/ton.
Open interest on the BMD was 198,360 lots, versus 213,363 lots Thursday. One lot is equivalent to 25 tons.
A total of 32,005 lots of CPO were traded versus 45,100 lots Thursday.
The financial markets in Malaysia were closed on Friday for a public holiday.
Ending BMD CPO futures prices in MYR/ton: 
Month   Close  Previous  Change   High    Low 
Feb'13  2,496     2,512     -16  2,550  2,485 
Mar'13  2,539     2,528     +11  2,563  2,525 
Apr'13  2,566     2,557     +09  2,592  2,552 
May'13  2,585     2,576     +09  2,609  2,572 

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