KUALA LUMPUR: Malaysian palm oil futures slid to touch a near five-year low on Thursday, following losses in overseas soy markets, and further dragged by forecasts of abundant supply of competing oilseeds alongside an expected surge in Southeast Asian palm output.
The benchmark October contract on the Bursa
Malaysia Derivatives Exchange fell to 2,115 ringgit in late
trade, its lowest since Oct. 15, 2013, before settling 2.0
percent down at 2,133 ringgit ($674) per tonne by Thursday's
close.
"It's because of the weak soybean oil prices and the
slightly stronger ringgit. There's also the ongoing bearish
sentiment after the MPOB and USDA data," said a trader with a
local commodities brokerage in Kuala Lumpur.
"Next, the nearest low to be tested is 2,013 ringgit touched
in October 2009 and also the July 2009 low of 1,964 ringgit --
the next fall may target these two levels."
The U.S. soyoil contract for December fell 1.9
percent in late Asian trade, while the most active January
soybean oil contract on the Dalian Commodities Exchange
slid as much as 3.7 percent to hit a contract low of 6,096 yuan.
Forecasts for crop-friendly weather across the U.S. Midwest
grain belt promised plentiful supplies of soybeans, and boosted
expectations that the U.S. Department of Agriculture (USDA)
would further raise its soybean production estimates in the
coming months.
The USDA on Tuesday pegged top soy exporter the U.S. to grow
a record crop of 3.82 million bushels, 16 percent more than a
year ago. Bigger supplies for crushing would weaken soyoil
prices and narrow its premium to palm -- potentially watering
down demand for the tropical oil.
The stronger ringgit added on pressure to the tropical
commodity, making the locally-priced feedstock more expensive
for overseas buyers and refiners. The Malaysian ringgit
rose as much as 0.6 percent to 3.1745 per dollar on Thursday,
its strongest since July 25.
Total traded volume on Thursday stood at 51,426 lots of 25
tonnes, much higher than the usual 35,000 lots.
Technicals were also bearish. Malaysian palm oil is expected
to fall more into a range of 2,094-2,124 ringgit per tonne, as
indicated by its wave pattern and a Fibonacci projection
analysis, said Reuters market analyst Wang Tao.
Palm prices, which are heading for their biggest weekly drop
since early January, are struggling with projections of a speedy
recovery in production in top growers Indonesia and Malaysia.
Industry regulator the Malaysian Palm Oil Board (MPOB) on
Monday showed Malaysian palm oil end-stocks rose to 1.68 million
tonnes in July, against trade estimates that inventories would
shrink, due to a stronger-than-expected rise in output.
Sluggish demand for palm oil has also turned investors wary.
Cargo surveyor data for exports of Malaysian palm oil between
August 1 and 10 were disappointing, falling about 20 percent
from the same period in July.
Export data on shipment volumes in the first half of August
will be released on Friday.
"Definitely the first 15 days exports is going to be lower
than last month," the Kuala Lumpur trader added. "Even if there
is an improvement compared to the first 10 days, it's not going
to help the market much. The talk about higher supply is still
there."
In other markets, Brent crude oil fell towards $104 a barrel
on Thursday as a contraction in the German economy underscored
sluggish demand in Europe while supply remained strong despite
conflict in key exporting countries Iraq and Libya.
Palm, soy and crude oil prices at 1020 GMT
Contract Month Last Change Low High Volume
MY PALM OIL AUG4 2150 -65.00 2145 2155 19
MY PALM OIL SEP4 2150 -49.00 2131 2171 2851
MY PALM OIL OCT4 2133 -43.00 2115 2150 21815
CHINA PALM OLEIN JAN5 5440 -126.00 5412 5574 686360
CHINA SOYOIL JAN5 6112 -218.00 6096 6254 645972
CBOT SOY OIL DEC4 33.72 -0.60 33.62 34.33 13389
NYMEX CRUDE SEP4 97.33 -0.26 97.07 97.54 13158
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 = 3.177 Malaysian ringgit)
($1 = 6.1531 Chinese yuan)
($1 = 60.86 Indian rupee)- Reuters
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