Palm oil slips off 5-week high, US drought supports

by **hlk** Wed 04 Jul 2012, 21:02

SINGAPORE: Malaysian crude palm oil futures edged lower on
Wednesday, off a five-week high, as traders booked profits from a
weather-fuelled rally that had boosted prices by more than 3 percent
this week.
Traders took cues from the U.S. Department of
Agriculture(USDA) which on Monday slashed its condition rating for
soybean crops to 45 percent good-to-excellent, from 53 percent a week
ago, due to extreme hot and dry weather.
Fewer higher-quality
soybeans mean lower volumes are likely to be crushed into soybean oil,
which could mean more vegetable oil demand shifting to the cheaper palm
oil.
"At the moment fundamentals are supporting bullishness, but
it looks like after going up so much for the past few days the market
could slow down and retrace back for a while," said a trader based in
Singapore with a foreign commodities house.
"But we expect prices to go up if next Monday's crop rating is bad again," the trader added, referring to the USDA report.
Benchmark
September palm oil futures on the Bursa Malaysia Derivatives Exchange
fell 0.1 percent to close at 3,122 ringgit ($990) per tonne. Prices
earlier rose as high as 3,147 ringgit, a level not seen since May 30.
Traded volumes stood at 26,553 lots of 25 tonnes each, slightly higher than the usual 25,000 lots.
On
the technicals front, palm oil will end its rebound at or below a
resistance at 3,155 ringgit per tonne, said Reuters market analyst Wang
Tao.
Malaysia's palm oil demand climbed in June from a month
earlier, according to cargo surveyor data, boosted by higher exports to
India and Pakistan. Both South Asian countries were stocking ahead of
the Muslim fasting month of Ramadan that begins at the end of July.
Higher exports could pile further pressure on Malaysia's stocks, which fell to a 13-month low in May.
Crude
oil prices fell back on Wednesday as investors' focus returned to the
grim economic backdrop and they took profits after sharp gains in
previous sessions.
In other vegetable oils markets, the most
active January 2013 soyoil contract on the Dalian commodity exchange
edged up 0.5 percent on U.S. weather concerns. The U.S. market is
closed for the Independence Day holiday. - Reuters