FCPO Related News (Tues, Mar 5)

Crude palm oil futures on Malaysia’s derivatives exchange rose Monday, as a recent selloff sent prices lower, triggering demand for the tropical oil, which may help prevent further stock buildup in Indonesia and Malaysia, the world’s biggest producers. The benchmark May contract at Bursa Malaysia Derivatives ended 1.9% higher at 2,413 ringgit a metric ton after moving in a MYR2,375-MYR2,415 range. "Palm oil’s recent slump has attracted buying interest for refined palm products. Higher demand for Southeast Asian palm oil could help to prevent further stock builds" in Indonesia and Malaysia, said a Singapore-based trading executive.

Stockpiles in the two countries, have risen to record levels in the past year as demand for the tropical oil, used to make a variety of consumer products ranging from cosmetics to biscuits and soap, fell on a global slowdown. Inventories in Malaysia, the world’s second largest palm oil producer rose to an all-time high of 2.63 million tons in January. The stocks have increased so much that they are weighing on price expectations. "You will see more shipments of refined palm into India in the coming weeks, as (Indian) refiners find it cheaper to buy refined cargoes from Malaysia and Indonesia," a trader at a Mumbai-based vegoil importing firm said.

India imported well over one million tons of edible oil in February, said B.V. Mehta, executive director at Solvent Extractors’ Association of India, due partly to lower prices and large purchases by buyers in anticipation of an import tax increase by the government. The tax hike, however, didn’t materialize when the government presented its 2013-2014 Budget last week. "Because of the surge in imports, we are anticipating edible oil stocks to hit another record (in February)," he said, adding that port stocks have probably risen to 1.80 million-1.90 million tons from 1.76 million tons in January.

In the cash market, refined palm olein for March shipment was offered at $815/ton, while cash CPO for prompt shipment was offered at MYR2,390/ton. Open interest on the BMD was 162,542 lots, versus 160,500 lots Friday. One lot is equivalent to 25 tons. A total of 36,692 lots of CPO were traded versus 35,258 lots Friday.

Today’s Support and Resistance for benchmark May contract is located around 2,395 and 2,440 respectively.