MARKET DEVELOPMENT
VEGOILS-Palm Losses Drag into 3rd Day on Concerns of Slowing Demand, Weak Soy
VEGOILS-Palm Losses Drag into 3rd Day on Concerns of Slowing Demand, Weak Soy
28/04/2014 (Reuters) - Malaysian palm oil futures stretched losses into a third straight session on Tuesday, tracking weak vegetable oil markets overseas, with prices further pressured by concerns that export demand will not be strong enough to check rising stockpiles.
The benchmark August contract on the Bursa Malaysia Derivatives Exchange closed 0.1 percent down at 2,506 ringgit ($779) per tonne on Tuesday. Prices dropped to 2,483 ringgit on Monday, last seen in October 2013, before recovering to close at 2,509 ringgit.
Total traded volume on Tuesday stood at 31,371 lots of 25 tonnes, just below the average 35,000 lots.
"We expect Ramadan demand to be strong but I think that has been taken into consideration already. Exports will be strong in May and maybe up to the first half of June at best," said a trader with a foreign commodities brokerage.
The Muslim holy month of Ramadan, followed by the Eid al-Fitr festival, begins in end-June this year and typically boosts consumption of the tropical oil, which is used as a cooking oil and to make a variety of foodstuff.
Cargo surveyor data reported that exports of Malaysian palm oil products between May 1-25 rose 13-14 percent from a month earlier, rising at a slower pace compared with a 23 percent jump in the first half of May.
"Prices might be under further pressure because stocks are coming up a little bit faster," the Kuala Lumpur-based trader added. Malaysia's end-April palm stocks rose to a three-month high of 1.77 million tonnes.
Technicals showed Malaysian palm oil is expected to test support at 2,472 ringgit per tonne, a break below which will lead to a further loss to 2,422 ringgit, said Reuters market analyst Wang Tao.
Traders said a drop in U.S. and China soyoil prices also dragged on palm prices, as it narrows the tropical oil's discount to the rival edible oil and could shift food and fuel demand away.
The U.S. soyoil contract for July fell 0.3 percent in late Asian trade, while the most active September soybean oil contract on the Dalian Commodities Exchange lost 0.2 percent.
But palm prices could get a boost from the El Nino weather pattern that can bring drought to Southeast Asia, where most of the world's oil palm is cultivated. A majority of weather forecasting models indicate an El Nino could develop around the middle of the year.
Planters said the crop-damaging phenomenon will hinder yields of palm fruit, though the bigger impact on output will likely be felt in 2015.
"El Nino will certainly affect our palm trees. It will cause stress but the effect will not be so immediate, maybe a year or so down the road," Boustead Plantations (IPO-BOPL.KL: Quote) Chairman Lodin Wok Kamaruddin told reporters in Kuala Lumpur on Tuesday.
"All and all, we expect prices to steady around 2,700-2,800 ringgit in the third or fourth quarter of this year."
Indonesia, the world's top palm producer, held its export tax for crude palm oil at 12 percent in June, unchanged from May, according to its ministry late on Monday. Malaysia, the No.2 grower, set its export duty for the crude grade at a more competitive 5.5 percent in June.
In other markets, Brent crude oil steadied above $110 a barrel on Tuesday on supply worries as the Ukraine government launched air strikes to try to put down a separatist revolt and Libya struggled to rein in rebels controlling several of the country's oil ports.
Palm, soy and crude oil prices at 1007 GMT
Contract Month Last Change Low High Volume
MY PALM OIL JUN4 2510 -10.00 2497 2511 228
MY PALM OIL JUL4 2505 -9.00 2488 2518 3826
MY PALM OIL AUG4 2506 -3.00 2488 2514 16228
CHINA PALM OLEIN SEP4 5890 -18.00 5880 5934 306560
CHINA SOYOIL SEP4 6790 -12.00 6780 6830 318146
CBOT SOY OIL JUL4 40.28 -0.10 40.04 40.45 7314
NYMEX CRUDE JUL4 104.01 -0.34 103.92 104.50 27777
Palm oil prices in Malaysian ringgit per tonne
CBOT soy oil in U.S. cents per pound
Dalian soy oil and RBD palm olein in Chinese yuan per tonne
Crude in U.S. dollars per barrel
($1 = 3.217 Malaysian ringgit)
($1 = 6.2486 Chinese yuan)
The benchmark August contract on the Bursa Malaysia Derivatives Exchange closed 0.1 percent down at 2,506 ringgit ($779) per tonne on Tuesday. Prices dropped to 2,483 ringgit on Monday, last seen in October 2013, before recovering to close at 2,509 ringgit.
Total traded volume on Tuesday stood at 31,371 lots of 25 tonnes, just below the average 35,000 lots.
"We expect Ramadan demand to be strong but I think that has been taken into consideration already. Exports will be strong in May and maybe up to the first half of June at best," said a trader with a foreign commodities brokerage.
The Muslim holy month of Ramadan, followed by the Eid al-Fitr festival, begins in end-June this year and typically boosts consumption of the tropical oil, which is used as a cooking oil and to make a variety of foodstuff.
Cargo surveyor data reported that exports of Malaysian palm oil products between May 1-25 rose 13-14 percent from a month earlier, rising at a slower pace compared with a 23 percent jump in the first half of May.
"Prices might be under further pressure because stocks are coming up a little bit faster," the Kuala Lumpur-based trader added. Malaysia's end-April palm stocks rose to a three-month high of 1.77 million tonnes.
Technicals showed Malaysian palm oil is expected to test support at 2,472 ringgit per tonne, a break below which will lead to a further loss to 2,422 ringgit, said Reuters market analyst Wang Tao.
Traders said a drop in U.S. and China soyoil prices also dragged on palm prices, as it narrows the tropical oil's discount to the rival edible oil and could shift food and fuel demand away.
The U.S. soyoil contract for July fell 0.3 percent in late Asian trade, while the most active September soybean oil contract on the Dalian Commodities Exchange lost 0.2 percent.
But palm prices could get a boost from the El Nino weather pattern that can bring drought to Southeast Asia, where most of the world's oil palm is cultivated. A majority of weather forecasting models indicate an El Nino could develop around the middle of the year.
Planters said the crop-damaging phenomenon will hinder yields of palm fruit, though the bigger impact on output will likely be felt in 2015.
"El Nino will certainly affect our palm trees. It will cause stress but the effect will not be so immediate, maybe a year or so down the road," Boustead Plantations (IPO-BOPL.KL: Quote) Chairman Lodin Wok Kamaruddin told reporters in Kuala Lumpur on Tuesday.
"All and all, we expect prices to steady around 2,700-2,800 ringgit in the third or fourth quarter of this year."
Indonesia, the world's top palm producer, held its export tax for crude palm oil at 12 percent in June, unchanged from May, according to its ministry late on Monday. Malaysia, the No.2 grower, set its export duty for the crude grade at a more competitive 5.5 percent in June.
In other markets, Brent crude oil steadied above $110 a barrel on Tuesday on supply worries as the Ukraine government launched air strikes to try to put down a separatist revolt and Libya struggled to rein in rebels controlling several of the country's oil ports.
Palm, soy and crude oil prices at 1007 GMT
Contract Month Last Change Low High Volume
MY PALM OIL JUN4 2510 -10.00 2497 2511 228
MY PALM OIL JUL4 2505 -9.00 2488 2518 3826
MY PALM OIL AUG4 2506 -3.00 2488 2514 16228
CHINA PALM OLEIN SEP4 5890 -18.00 5880 5934 306560
CHINA SOYOIL SEP4 6790 -12.00 6780 6830 318146
CBOT SOY OIL JUL4 40.28 -0.10 40.04 40.45 7314
NYMEX CRUDE JUL4 104.01 -0.34 103.92 104.50 27777
Palm oil prices in Malaysian ringgit per tonne
CBOT soy oil in U.S. cents per pound
Dalian soy oil and RBD palm olein in Chinese yuan per tonne
Crude in U.S. dollars per barrel
($1 = 3.217 Malaysian ringgit)
($1 = 6.2486 Chinese yuan)