MARKET DEVELOPMENT
VEGOILS-Palm Ends Near 1-wk High After Weather Warning Triggers Supply Fears
VEGOILS-Palm Ends Near 1-wk High After Weather Warning Triggers Supply Fears
29/10/2013 (Reuters) - Malaysian palm oil futures surged to a near one-week high on Monday, snapping three straight days of losses as warnings of wet weather fanned concerns that supply in the world's second-largest producer could wane earlier than expected.
Malaysia's meteorological department issued a notice on its website late on Monday, warning of "thunderstorms and heavy rain" over most of Malaysia, including the major palm oil producing states of Sabah, Johor and Pahang.
"They're worried about the wet weather which will bring down production," said a trader with a foreign commodities brokerage. "Although the ringgit is strong, the weather is the one that's affecting the market."
The monsoon season, which typically rolls in from November, may cause floods that disrupt harvesting and complicates the transportation of fresh fruit bunches to mills.
"This is a supply-driven rally," said another trader with a local commodities brokerage. "We're heading towards the months of November, December and January which produce thinner supply because of the monsoon and seasonal cycles," the trader added.
The benchmark January contract on the Bursa Malaysia Derivatives Exchange surged as high to 2,483 ringgit in late Monday trade, reversing losses from the morning session. Prices by the day's close settled at 2,460 ringgit ($786), a 0.8 percent gain.
Total traded volume stood at 36,495 lots of 25 tonnes each, marginally higher than the usual 35,000 lots.
The Malaysian ringgit raced to its highest in more than four months on Monday to trade at 3.1220 per dollar as the government steps in to tackle a worrying fiscal deficit attracted capital inflows.
A stronger ringgit makes palm feedstock expensive for overseas buyers and refiners.
Malaysia's plans to raise its biodiesel requirement to 7 percent palm oil, up from 5 percent, will see tighter stockpiles from next year if the policy is successfully implemented nationwide.
Reuters reported that the "B7" biodiesel blend could be mandatory from December as talks with interested parties were nearing a conclusion.
"We estimate that when B7 is fully implemented, it could raise the country's consumption of crude palm oil for biodiesel usage to 700,000 tonnes per annum," said CIMB analyst Ivy Ng in a note on Monday.
"This would represent an increase of 550,000 tonnes from Malaysia's current biodiesel consumption of 150,000 tonnes, and will be positive for crude palm oil prices from H2 2014 onwards," she added.
In other markets, Brent crude rose towards $108 a barrel on Monday, after three days of losses, amid expectations the U.S. Federal Reserve would maintain its economic stimulus at its policy meeting this week.
In competing vegetable oil markets, the U.S. soyoil contract for December rose 0.9 percent in late Asian trade. The most-active May soybean oil contract on the Dalian Commodities Exchange dropped 0.6 percent.
Palm, soy and crude oil prices at 1024 GMT
Contract Month Last Change Low High Volume
MY PALM OIL NOV3 2470 +22.00 2453 2502 741
MY PALM OIL DEC3 2470 +26.00 2428 2489 3143
MY PALM OIL JAN4 2460 +19.00 2426 2483 20627
CHINA PALM OLEIN MAY4 6084 -14.00 6062 6122 494162
CHINA SOYOIL MAY4 7130 -40.00 7108 7144 449000
CBOT SOY OIL DEC3 41.06 +0.33 40.73 41.21 7751
NYMEX CRUDE DEC3 97.92 +0.07 97.50 98.05 13130
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=3.13 Malaysian ringgit)
Malaysia's meteorological department issued a notice on its website late on Monday, warning of "thunderstorms and heavy rain" over most of Malaysia, including the major palm oil producing states of Sabah, Johor and Pahang.
"They're worried about the wet weather which will bring down production," said a trader with a foreign commodities brokerage. "Although the ringgit is strong, the weather is the one that's affecting the market."
The monsoon season, which typically rolls in from November, may cause floods that disrupt harvesting and complicates the transportation of fresh fruit bunches to mills.
"This is a supply-driven rally," said another trader with a local commodities brokerage. "We're heading towards the months of November, December and January which produce thinner supply because of the monsoon and seasonal cycles," the trader added.
The benchmark January contract on the Bursa Malaysia Derivatives Exchange surged as high to 2,483 ringgit in late Monday trade, reversing losses from the morning session. Prices by the day's close settled at 2,460 ringgit ($786), a 0.8 percent gain.
Total traded volume stood at 36,495 lots of 25 tonnes each, marginally higher than the usual 35,000 lots.
The Malaysian ringgit raced to its highest in more than four months on Monday to trade at 3.1220 per dollar as the government steps in to tackle a worrying fiscal deficit attracted capital inflows.
A stronger ringgit makes palm feedstock expensive for overseas buyers and refiners.
Malaysia's plans to raise its biodiesel requirement to 7 percent palm oil, up from 5 percent, will see tighter stockpiles from next year if the policy is successfully implemented nationwide.
Reuters reported that the "B7" biodiesel blend could be mandatory from December as talks with interested parties were nearing a conclusion.
"We estimate that when B7 is fully implemented, it could raise the country's consumption of crude palm oil for biodiesel usage to 700,000 tonnes per annum," said CIMB analyst Ivy Ng in a note on Monday.
"This would represent an increase of 550,000 tonnes from Malaysia's current biodiesel consumption of 150,000 tonnes, and will be positive for crude palm oil prices from H2 2014 onwards," she added.
In other markets, Brent crude rose towards $108 a barrel on Monday, after three days of losses, amid expectations the U.S. Federal Reserve would maintain its economic stimulus at its policy meeting this week.
In competing vegetable oil markets, the U.S. soyoil contract for December rose 0.9 percent in late Asian trade. The most-active May soybean oil contract on the Dalian Commodities Exchange dropped 0.6 percent.
Palm, soy and crude oil prices at 1024 GMT
Contract Month Last Change Low High Volume
MY PALM OIL NOV3 2470 +22.00 2453 2502 741
MY PALM OIL DEC3 2470 +26.00 2428 2489 3143
MY PALM OIL JAN4 2460 +19.00 2426 2483 20627
CHINA PALM OLEIN MAY4 6084 -14.00 6062 6122 494162
CHINA SOYOIL MAY4 7130 -40.00 7108 7144 449000
CBOT SOY OIL DEC3 41.06 +0.33 40.73 41.21 7751
NYMEX CRUDE DEC3 97.92 +0.07 97.50 98.05 13130
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=3.13 Malaysian ringgit)