FCPO Related News

Crude palm oil futures on Malaysia’s derivatives exchange fell to a one-month low Tuesday, reflecting ample supplies of vegetable oils and uncertainty ahead of the U.S. presidential election. The benchmark January contract at Bursa Malaysia Derivatives ended 1.6% lower at 2,372 ringgit a metric ton after falling as much as 1.7% to MYR2,370/ton, the lowest level since Oct. 8.

Palm oil rose early, reflecting concern about a potential disruption to Malaysia’s harvest due to heavy rain, but declined sharply in the afternoon session. Palm oil also fell as part of a broader fund liquidation of commodity positions, a broker in Kuala Lumpur said. Prices are likely to fall toward MYR2,200/ton if inventories rise to another record in November, he said.

Inventories in Malaysia, the world’s No. 2 CPO producer, rose to a all-time high of 2.48 millions in September. Stockpiles are widely tipped to have hit another record in October, around 2.55 million-2.60 million tons, as production growth continued to outpace export demand, a Mumbai-based analyst said. Industry regulator the Malaysian Palm Oil Board is scheduled to issue October crop data Monday.          [Dow Jones Newswire]

Some trade estimates suggest Malaysia’s palm oil inventory will rise to 3 million tonnes by the end of December. Stocks are set to expand further in the coming months simply because palm fruits are perishable and have got to be crushed promptly. Palm oil may face a bear market reminiscent of 2001-2002. Additionally, it would be important to recall that between 2007 and 2009, Indonesia planted about 2.5 million hectares of oil palm, and the plants are now in full vigour to generate high yields.

On the other hand, demand for biodiesel, an important market driver, has been decelerating. Not only are the fundamentals of palm oil likely to turn weak, an anticipated major rebound in global soyabean and other oilseeds production in 2013 will considerably expand the world oil pool which will put further pressure on CPO prices. Between now and March (traditionally the lean season for palm oil), CPO prices can be expected to trade range-bound between 2,250-2,300 ringgits and 2,550-2,600 ringgits a tonne. Beyond March, CPO prices risk a sharp correction with potential to test 2,000 ringgits a tonne.

In the longer term, there is a strong indication that use of crop-based biofuels will be capped. Palm oil is feedstock for biodiesel. The European Union has taken the lead in the direction. Also, there is a call to end all subsidies for biofuels by 2020. So, further growth potential in the biodiesel segment for CPO is restricted.          [The Hindu]

Rising European demand could continue to support Malaysian exports, as steep falls in palm oil prices are making it more attractive than other vegetable oils for use in biodiesel production. Palm oil prices are likely to rise sharply in coming months on brisk buying interest as global importers seek cheaper alternatives to more expensive products including soyoil, Hamburg-based oilseeds analysts Oil World said late last month.           [Reuters]

Today’s Support and Resistance for benchmark January contract is located around 2,360 and 2,420 respectively.