Palm oil falls September 20, 2013

September 20, 2013

Palm oil
Palm oil

Malaysian palm oil futures fell on Thursday after the ringgit jumped to a three-month high following the US Federal Reserve’s surprise decision to postpone any reduction in its bond-buying programme, eating into profits for overseas buyers. The ringgit rose nearly 3 percent on Thursday after the Fed stunned markets and decided not to taper its monthly purchases of $85 billion in US bonds just yet.

Although the Fed’s move bolstered the value of commodities priced in the dollar and lifted soy, crude oil and other markets, it made ringgit-priced palm oil more expensive for overseas buyers and kept a lid on gains. “Because the Fed’s stimulus is still on, most investors are talking about pumping more money into commodity markets,” said a trader with a foreign commodities brokerage in Kuala Lumpur.

By Thursday’s close, the benchmark December contract on the Bursa Malaysia Derivatives Exchange had lost 0.2 percent to 2,318 ringgit ($736) per tonne. Prices in the morning session had dropped to 2,296 ringgit, near a one-month low of 2,294 ringgit hit on Tuesday. Total traded volumes stood at 47,814 lots of 25 tonnes each, much higher than the average 35,000 lots.

On the technical front, Malaysian palm oil may fall to 2,270 ringgit per tonne, according to Reuters market analyst Wang Tao. Indonesia and Malaysia, the world’s top producers that contribute about 90 percent of global palm oil supply, are expected to see higher output starting this month as oil palm trees enter the peak production cycle.

Leading industry analyst Dorab Mistry said last week that the higher output cycle could last into April 2014, adding to the supply of competing oilseeds and dragging prices to new lows in January. Prices have lost 3.6 percent so far this month. But strong demand for the tropical oil has helped prop up sentiment. Data from cargo surveyors showed that exports of Malaysian palm oil in the first half of September climbed between 12-14 percent compared to the same period in August.

Investors will be watching for export data for the September 1-20 period, to be released on Friday, to gauge demand. In vegetable oil markets, the US soyoil contract for December rose 0.4 in late Asian trade. The Dalian Commodities Exchange is closed from September 19 onwards for the Mid-Autumn Festival and will resume trading on Monday. Courtesy Reuters

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