MARKET DEVELOPMENT
VEGOILS-Palm Oil Surges to Near 2-Mth High as Output Seen Falling
VEGOILS-Palm Oil Surges to Near 2-Mth High as Output Seen Falling
24/10/2013 (Reuters) - Malaysian palm oil futures rose to their highest level in nearly two months on Wednesday, recovering from the morning session losses, as investors banked on estimates that output had started to seasonally slow in the world's second-largest grower.
Production traditionally rises in the second half of the year and peaks only in October, before slowing down towards the end of the year as palm oil trees rest and monsoon rains complicate harvesting.
But a group of planters on Tuesday estimated output fell by 10.5 percent in the first 20 days of October, fuelling expectations that end-stocks would stay below the two million tonne mark this year despite earlier bearish forecasts warning of surging stocks and production.
Soyoil markets in the United States and China, typically tracked by palm, also gained momentum in late trade, supporting prices of the tropical oil.
The U.S. soyoil contract for December rose 0.4 percent in late Asian trade, while the most-active January soybean oil contract on the Dalian Commodities Exchange rose 0.2 percent.
"The news about dropping production in October is the reason," said a trader with a local commodities brokerage in Kuala Lumpur.
The benchmark January contract on the Bursa Malaysia Derivatives Exchange rose to 2,485 ringgit in late trade, the highest since Aug. 28, before settling at 2,482 ringgit ($785) by Wednesday's close, a 1.1 percent climb.
That brought prices up 1.8 percent so far this year, their first yearly rise since 2010.
Total traded volume stood at 32,615 lots of 25 tonnes each, slightly lower than the usual 35,000 lots.
The Malaysian ringgit earlier rose as much as 0.76 percent early Wednesday, curbing buying interest, but then eased to 3.1650 in late trade as investors including macro funds took profits amid jitters ahead of the 2014 budget due on Friday.
Exports of palm oil traditionally slows in the last quarter of the year, traders say, as cold winter temperatures solidifies the tropical oil and makes it less appealing to buyers such as China, the world's second-largest importer.
But festive demand ahead of a major Chinese celebration at end-January might keep exports up and eat into stocks.
"Normally towards winter demand will slow down. But during winter is also when China might buy a lot ahead of the Lunar New Year festival," said one trader.
But palm was pressured by falling crude oil prices, as it shifts demand away from crude palm oil as an alternate biodiesel feedstock.
Brent crude slipped towards $109 a barrel on Wednesday on rising inventories in China and expectations of a further buildup in the United States, the world's top consumer.
Technicals were slightly bearish. Malaysian palm oil still faces resistance at 2,449 ringgit per tonne, and may retrace to 2,406 ringgit, Reuters market analyst Wang Tao said.
Palm, soy and crude oil prices at 1045 GMT
Contract Month Last Change Low High Volume
MY PALM OIL NOV3 2488 +31.00 2440 2488 402
MY PALM OIL DEC3 2484 +24.00 2439 2484 6351
MY PALM OIL JAN4 2482 +27.00 2436 2485 15530
CHINA PALM OLEIN MAY4 6178 +56.00 6110 6204 973574
CHINA SOYOIL MAY4 7216 +14.00 7152 7236 782212
CBOT SOY OIL DEC3 41.67 +0.15 41.25 41.75 5412
NYMEX CRUDE DEC3 96.75 -1.55 96.74 98.29 34212
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=3.166 Malaysian ringgit)
Production traditionally rises in the second half of the year and peaks only in October, before slowing down towards the end of the year as palm oil trees rest and monsoon rains complicate harvesting.
But a group of planters on Tuesday estimated output fell by 10.5 percent in the first 20 days of October, fuelling expectations that end-stocks would stay below the two million tonne mark this year despite earlier bearish forecasts warning of surging stocks and production.
Soyoil markets in the United States and China, typically tracked by palm, also gained momentum in late trade, supporting prices of the tropical oil.
The U.S. soyoil contract for December rose 0.4 percent in late Asian trade, while the most-active January soybean oil contract on the Dalian Commodities Exchange rose 0.2 percent.
"The news about dropping production in October is the reason," said a trader with a local commodities brokerage in Kuala Lumpur.
The benchmark January contract on the Bursa Malaysia Derivatives Exchange rose to 2,485 ringgit in late trade, the highest since Aug. 28, before settling at 2,482 ringgit ($785) by Wednesday's close, a 1.1 percent climb.
That brought prices up 1.8 percent so far this year, their first yearly rise since 2010.
Total traded volume stood at 32,615 lots of 25 tonnes each, slightly lower than the usual 35,000 lots.
The Malaysian ringgit earlier rose as much as 0.76 percent early Wednesday, curbing buying interest, but then eased to 3.1650 in late trade as investors including macro funds took profits amid jitters ahead of the 2014 budget due on Friday.
Exports of palm oil traditionally slows in the last quarter of the year, traders say, as cold winter temperatures solidifies the tropical oil and makes it less appealing to buyers such as China, the world's second-largest importer.
But festive demand ahead of a major Chinese celebration at end-January might keep exports up and eat into stocks.
"Normally towards winter demand will slow down. But during winter is also when China might buy a lot ahead of the Lunar New Year festival," said one trader.
But palm was pressured by falling crude oil prices, as it shifts demand away from crude palm oil as an alternate biodiesel feedstock.
Brent crude slipped towards $109 a barrel on Wednesday on rising inventories in China and expectations of a further buildup in the United States, the world's top consumer.
Technicals were slightly bearish. Malaysian palm oil still faces resistance at 2,449 ringgit per tonne, and may retrace to 2,406 ringgit, Reuters market analyst Wang Tao said.
Palm, soy and crude oil prices at 1045 GMT
Contract Month Last Change Low High Volume
MY PALM OIL NOV3 2488 +31.00 2440 2488 402
MY PALM OIL DEC3 2484 +24.00 2439 2484 6351
MY PALM OIL JAN4 2482 +27.00 2436 2485 15530
CHINA PALM OLEIN MAY4 6178 +56.00 6110 6204 973574
CHINA SOYOIL MAY4 7216 +14.00 7152 7236 782212
CBOT SOY OIL DEC3 41.67 +0.15 41.25 41.75 5412
NYMEX CRUDE DEC3 96.75 -1.55 96.74 98.29 34212
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=3.166 Malaysian ringgit)