FCPO Related News

Malaysian palm oil futures dropped to their lowest this year on Thursday amid rising inventory levels. Futures tumbled to 2,804 ringgit per tonne, the lowest since October 2011, as global oilseed supplies were expected to pick up on expectations for crop yields across a drought-stricken U.S. Midwest to exceed forecasts.

Also weighing on prices was data that showed manufacturing in China contracted for the 11th month in a row in September, indicating the world's second largest economy remains on track for a seventh quarter of slowing growth. "There is excess palm oil at ports, storage tanks are full and production is doing well, so prices are under pressure," said a Singapore-based trader with a global commodities house."On top of that, the overall external market is also weak."

Exports remained strong according to latest cargo surveyor data, but traders said rising inventory levels that could surpass 2.2 million tonnes in September - which would be the highest level for this year - was weighing on the market. "Compared to last month, exports should be better. But the major thing is stocks have to go down for the market to move higher," said a trader with a foreign commodities brokerage in Malaysia. Cargo surveyor Intertek said export shipments rose almost 15 percent during Sept. 1-20 over the same period a month ago, while another cargo surveyor, SGS, reported an almost 13 percent increase from a month ago.    

In a bearish sign for palm oil, Brent crude eased below $108 a barrel on Thursday after the China data weakened sentiment in a market that is already reeling from Saudi Arabia's pledge to keep global crude oil prices low. In other vegetable oil markets, U.S. soy oil for December delivery dropped 1.3 percent. The most active January 2013 soy oil contract on the Dalian Commodity Exchange closed 0.3 percent lower. 

Palm's technical weakness could encourage investors to add short positions and drag values toward last year's low of MYR2,754/ton in the near term, a commodities analyst at a Kuala Lumpur-based investment bank says. At closing, the benchmark December contract on the Bursa Malaysia Derivatives Exchange had lost 1.4 percent to 2,820 ringgit ($918) per tonne. Today’s Support and Resistance for benchmark December is located around 2765 and 2845 respectively.