12/0/2011 (The Star) - Palm oil futures on Bursa Derivatives Exchange closed higher yesterday despite the release of stronger-than-expected palm oil production, stocks and export figures for March by the Malaysian Palm Oil Board (MPOB).

The three-month benchmark CPO futures for June contract rose RM18 to RM3,417 per tonne while CPO for April and May contracts were up RM21 each to settle at RM3,455 and RM3,430 per tonne respectively.

A source told StarBiz that CPO prices were traded higher at 1.6% or RM3,454 per tonne.

However, prices retreated slightly in mid-trade following higher production and stock figures by MPOB before closing higher on expectations of further gains on soyabean prices.

The United States Department of Agriculture had cut its estimte for soyabean oil inventories to 2.358 billion pounds this month, down 2.1% from its March projection.

Meanwhile, MPOB reported that palm oil production in March rose by 29.4% to 1.42 million tonnes. According to analysts, the production was the highest in almost 12 years following recovery in yields.

Stock for the month under review was 9% higher at 1.61 million tonnes while export was up at 1.23 million tonnes from 1.11 million tonnes a month earlier, said MPOB.

Projecting a higher CPO average at RM3,000 per tonne this year, Kenanga Research in its latest plantation update said CPO prices would weaken slightly in the second quarter and set to experience a sharper price decline in the second half.

“We expect significant build-ups in CPO inventory and production to start by mid-2011, meaning CPO prices could commence its down-cycle by second half of the year,” it added.

It said CPO production should improve in line with the weather conditions.

“After two years of declining yields, palm oil trees are expected to be in better form this year. Combination of these effects, if prolonged, may cause inventory to swell above the three-year average level of 1.73 million tonnes in second half of 2011,” said Kenanga Research.

Meanwhile, soyabean oil price is expected to be supported by tight production. Overall, soyabean is losing area to corn and wheat which has gained four million and 4.4 million acres respectively. Kenanga Research said: “We think that this will provide support to CPO price in 2011.”