FCPO Related News (Fri, Jan 11)

Crude palm oil futures on Malaysia’s derivatives exchange ended lower Thursday as investor sentiment weakened considerably after government data showed inventories were higher at the end of December despite a drop in production. The benchmark March contract on Bursa Malaysia Derivatives settled 1% lower at 2,387 ringgits a metric ton after tumbling as much as 2.3% to MYR2,356/ton, the lowest since Dec. 21.

State-run Malaysian Palm Oil Board, the industry regulator, said in a midday report that inventories at the end of December rose 2.4% from a month earlier to an all-time high of 2.63 million tons. The figure exceeded market expectations of 2.51 million tons, but matched a Nov. 8 forecast by leading vegetable oil analyst Dorab Mistry, who had also tipped that stocks would hit 3 million tons by Jan. 1 and that prices must fall to MYR2,200/ton to stimulate extra demand and clear away stocks. The December crop data also put overall 2012 CPO output at 18.8 million tons, a modest 0.5% drop from 18.9 million tons reached in 2011. "The MPOB data [on end-December stocks] is bearish, given the large builds in Malaysian refined [palm oil] products to 1.05 million tons in December," Chandran Sinnasamy, head trader at Kuala Lumpur-based LT International, said.

Market participants also said stricter quality control rules for cooking oil imports by major palm oil importer China, which came into effect Jan. 1, contributed to the rise in refined product stockpiles in the world’s no. 2 producer. Shipments of refined palm oil, refined palm olein and refined palm stearin were affected by Beijing’s tougher measures, as these products are generally used as key feedstock in a wide variety of food products. Cargo surveyors Intertek Agri Services and SGS (Malaysia) Bhd. both said Thursday that Jan. 1-10 exports to China fell sharply, reflecting exporters’; reluctance in shipping cargoes due to uncertainty surrounding China’s rules. "Exporters aren’t sure whether the inspection officers at Chinese ports would turn the entire vessel way if they don’t meet new requirements or allow another round of refining at load-ports," a vegetable oil exporter at Pasir Gudang said. Intertek said exports to China fell 52% from a month earlier to 85,450 tons, while SGS put the figure at 76,650 tons, a decline of 58%.

Still, not everyone is bearish on the market. Planters in Southeast Asia expect January oil production to fall sharply due to a seasonal dip in yields, while inclement weather in the region is also hampering harvesting, a broker at a Kuala Lumpur-based bank said. Open interest on the BMD was 170,416 lots, versus 169,597 lots Wednesday. One lot is equivalent to 25 tons. A total of 50,625 lots of CPO were traded versus 37,074 lots Wednesday.           [Dow Jones Newswire]

Dec 11 (Reuters) - Malaysia will set a tax rate for the export of crude palm oil for January by using the average sales price from Nov. 10 to Dec. 9 as the reference price, a government source said, a level that analysts said could result in zero tax. The new tax rate comes under a plan approved by the world's second-largest palm oil producer in October to cut crude palm oil (CPO) export taxes as it tries to claw back market share from top producer Indonesia.

Under the new structure, January export taxes are likely be set at zero, given that the average CPO price from Nov. 10 to Dec. 9 fell below the lowest reference price of 2,250 ringgit ($740) per tonne, Maybank Investment Bank said in a research note on Tuesday. This would help Malaysian exporters ship as much CPO as possible to reduce a record stockpile of 2.56 million tonnes in November.

The government will announce the tax levy on the 15th of every month using Malaysian Palm Oil Board prices for reference and will formalise the January tax in a gazette set to be issued on Dec. 17, said the source, who declined to be identified because he is not authorised to speak to the media. Malaysian exporters have been concerned that the new tax mechanism could spark a tax war with Indonesia, although the world's largest palm oil producer said it was resisting pressure to change its export tax system in response to Malaysia's planned tax cuts, a junior minister said on Tuesday. ($1 = 3.0595 Malaysian ringgit)           [Reuters]

Today’s Support and Resistance for benchmark March contract is located around 2,350 and 2,400 respectively.