Palm oil slips

March 14, 2013

Malaysian palm oil futures slipped
Malaysian palm oil futures slipped

Malaysian palm oil futures slipped to a two-month low on Wednesday as weakness persisted in overseas soyabean markets, although traders said easing palm oil output should provide some support. US soyabean prices have been pressured by weak export demand, which also weighed on soybean oil, with China’s soyabean oil losing more than 3 percent so far this week.

Palm oil tends to track soybean oil prices closely as the commodities are used as substitutes for one another. But traders said a decline in production in February that may continue this month could provide some support for palm oil prices. “Liquidation persists in futures, although some traders think it is funds-related,” said a trader with a commodities brokerage in Malaysia. “The well-advertised supply constraints should keep fundamentals intact.”

By Wednesday’s close, the benchmark May contract on the Bursa Malaysia Derivatives Exchange had dropped 0.6 percent to 2,397 ringgit ($773) per tonne, slightly above its intraday low of 2,365 ringgit, a level unseen since January 14. Total traded volume stood at 31,784 lots of 25 tonnes each, higher than the usual 25,000 lots.

Technicals showed Malaysian palm oil is expected to fall to 2,384 ringgit per tonne, said Reuters market analyst Wang Tao based on a wave analysis. But despite short-term weakness, market participants said palm oil fundamentals remained intact, on hopes that stocks will continue to ease on lower production and a demand recovery.

Malaysian palm oil stocks fell to 2.44 million tonnes in February from 2.58 million in January, thanks largely to a near 20 percent drop in production. Export demand for the March 1-10 period was flat with a month ago, with traders now shifting their focus to the March 1-15 data due on Friday for a better indication of the demand trend.

Crude palm oil shipments fell by more than half after Malaysia raised its export tax for the grade to 4.5 percent from zero percent. Top rival Indonesia increased its tariff to 10.5 percent from 9 percent for the month. In other vegetable oil markets, US soyaoil for May delivery edged down 0.4 percent in late Asian trade. The most-active September soybean oil contract on the Dalian Commodities Exchange lost 1.8 percent.Source Reuters

World Agriculture

Published:  Zarai Media Team

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