MARKET DEVELOPMENT
16-11-2001
Palm oil prices expected to extend mini bull run
16 November 2001 (Business Times) - MALAYSIA’S crude palm oil (CPO) marketlooks set to continue its bullish streak or a mini bull run in the nearterm due to tight edible oils supplies globally.Tradewinds Plantation Services Sdn Bhd executive director Rashidi Omarsaid unless a major crisis hits the sector, such as overproduction, hesees no reason why palm oil prices cannot continue with their currentmomentum.“It does look to me that the worst seems to be over for the sector and itis set for a brighter future in response to a host of marketfriendly-factors,†he told Business Times in Kuala Lumpur yesterday.The commodity was trading in February at RM693 a tonne on the spot market,its lowest level in more than a decade and a sharp reversal from the peakof RM2,505.71 a tonne in May 1998.CPO prices hovered between RM700 and RM800 a tonne, averaging RM743 inMay, RM795.50 in June and RM893 in July before shooting limit-up acrossthe board and breaching the RM1,000 a tonne mark at the MalaysiaDerivatives Exchange on July 12, a level not seen in 13 months.Since then prices have steadily climbed and surged 150 per cent from RM693a tonne in February to RM1,125 a tonne for the physical December Southcontract last Tuesday.A few weeks after the September 11 terrorist attacks on the US, prices ofthe commodity briefly plunged to RM850 a tonne but have since steadilyclimbed back to the RM1,000 level.The sector has been hurt for the past two years due to intense competitionfrom the world’s 16 other edible oils such as sunflower and rapeseed andweak demand.The Malaysian Palm Oil Board (MPOB), the country’s palm oil industryregulator and watchdog, on Monday released its October figures on palm oiloutput, export and national stockpile.Malaysia’s palm oil exports in October rose markedly to 898,918 tonnes, a37.87 per cent increase from 652,020 tonnes in the previous month, furtherlifting sentiment in the market.“For us small players, this is basically good news and coupled with thevarious efforts by the Government to boost the sector such as replanting,we expect prices to average at RM1,200 a tonne next year,†said Rashidiwho oversees some 60,000ha of oil palm, mainly in Sabah and Sarawak.A trader said that with the war being almost over in Afghanistan, shipperscan now put the war-risk premium for insurance cover behind them and lookforward to exporting palm oil to Europe, India and China.“The market is monitoring closely exports for this month which we hopewill touch the 1.1-million-tonne mark by November 30,†he said.According to cargo surveyor Societe Generale de Surveillance (SGS),Malaysia’s CPO exports from November 1 to November 15 registered 593,084tonnes, a 33 per cent increase compared with 443,614 during the sameperiod last month.SGS said China consumed the bulk of it with 87,237 tonnes, India 64,500tonnes, Pakistan 58,890 tonnes, and the European Union 146,647 tonnes.MPOB will release official exports, production and national stockpilefigures for November on December 15.“Prices may test the next resistance level at RM1,200, a three-month high,in the near term after breaching the previous mark at RM1,153 when ittraded as high as RM1,170 a tonne at mid-day yesterday,†said the trader.However, another trader disagreed, saying the market may lose steam afterSGS released the figures.The trader said buyers are already selling down on concerns of thecommodity being a bit overpriced, sending the market into a technicalretracement and correction.Meanwhile, at the Malaysia Derivatives Exchange, CPO futures closed loweryesterday on profit-taking after Tuesday’s rally, a dealer said.“However, the outlook for CPOprices is still bright in the intermediateterm due to the fasting month (which starts on Saturday).This will helpboost demand from Islamic countries such as Pakistan, Bangla-desh andparts of India,†the dealer said.He added that the current wet spell is expected to depress supply furtherand prevent workers from harvesting, which will buoy prices.Benchmark third-month January contract closed RM46 lower at RM1,105 atonne with November, December, February and March easing RM11, RM36, RM46and RM43 to close at RM1,100, RM1,089, RM1,114 and RM1,116 a tonne,respectively.Total open positions increased 261 contracts to 12,756 contracts whiletotal turnover surged 1,440 lots, or 200 per cent to 2,874 lots.
