Monday, 24 September 2012

FCPO Related News
Malaysian palm oil futures tumbled on Monday to their lowest in two years, hurt by rising inventories and steep losses in U.S. soybeans on expectations of higher output. Soybeans fell below $16 a bushel on Monday for the first time in 11 weeks, as the harvest advanced at a record pace and investors worried about the economy fled to the dollar, but bargain buying pared losses from the session low. (Reuters)
However, CPO futures may recover due to higher palm export demand. Palm oil exports for 1-25 September  is up 8.3% from the previous month to around 1.17 million metric tons, cargo surveyor Intertek Agri Services said today.  Another surveyor, SGS (Malaysia) Bhd., is expected to issue its estimate for Sept. 1-25 exports later in the day. Support could also come from end users buying on dips," as palm oil's technical indicators show signs of an oversold market, a vegoil exporter in Pasir Gudang says, tipping resistance at MYR2,660/ton. The benchmark December contract at Bursa Malaysia Derivatives ended 4.2% lower at 2,646 ringgit ($860.87) a metric ton after falling as much as 6.7% to MYR2,577/ton, the lowest since September 2010.
Analyst Dorab Mistry told a vegetable oil conference in Mumbai over the weekend that palm oil stockpiles in Malaysia, the world’s largest producer after Indonesia, could rise to a record 3 million tons by early January as slowing global economic growth weakens demand for vegetable oils. "Demand for palm oil and for vegetable oils in general has been softer than expected in 2012 [due to] slower growth in biofuel production and the difficult economic situation in developing countries, coupled with high prices," Mr. Mistry said.
Still, further declines in palm oil values are likely to be limited as "the market is oversold and some investors will likely snap up cheap positions," a commodities broker in Kuala Lumpur said, adding that the drop in palm oil prices could spur fresh demand from India, the world’s largest importer of palm oil. India's edible oil market is very price sensitive, with low income-earners generally opting for whatever oil is cheapest. India's edible oil imports are likely to rise by about 500,000 tons in the 12 months starting Nov. 1 from an estimated 9.8 million tons in the previous 12-month period, with the increase mostly reflecting a rise in palm oil shipments, said Mr. Dinesh Shahra, managing director of India's largest palm oil refiner, Ruchi Soya Industries Ltd.
According to Thomas Mielke, editor of Hamburg-based newsletter Oil World, palm oil prices are "sizeably undervalued" in comparison with soy oil and the discount is unlikely to be sustained as lower prices will prompt importers to buy more palm oil. "Palm oil is offered at discounts of more than US$250 (per tonne) under soybean oil. I think this is not sustainable. We are going to see world import demand to shift to the more effectively priced palm oil," he  said at a conference in Mumbai over the weekend. The increased demand will help the world's top two palm oil producers - Indonesia and Malaysia - raise exports and trim inventory that has been depressing palm oil prices, Mielke said in his video presentation to the Globoil India conference.
CBOT soybean futures hit an all-time high of US$17.94-3/4 a bushel this month, but have since fallen nearly seven per cent as farmers in the US hastened harvesting of their new season crop. However, that crop is likely to be used up quickly due to higher prices and that will again create tight supplies, allowing prices to resume their rally, Mielke said, without giving any time frame. "Soyabean prices will resume their rally, exceeding US$18 a bushel, probably rising to US$19 or US$20 or above if any problems occur in South America," he said. Sowing has been progressing in South America, where output was hit by a severe drought last year.
Farmers  in Brazil's grain belt jump-started planting after early showers set the scene for what is expected to be a bumper corn and record soy crop, producers and analysts said on Friday. If rains continue in the coming weeks as forecast, Brazil could churn out 81 million tonnes of oilseed and replace the drought-stricken United States as the world's top soybean producer, according to the U.S. agriculture department. Strong and early 2012/2013 grains harvests from Brazil and neighboring Argentina would be welcome by food importing nations since lower U.S. production forecasts have driven up prices and stirred supply fears.

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