CPO Futures Market falls after MPOB stocks, output data

CPO Futures Market falls after MPOB stocks, output data
Business & Markets 2013
Written by Ho Wah Foon of theedgemalaysia.com
Wednesday, 14 August 2013 16:56

KUALA LUMPUR (Aug 14): Crude palm oil (CPO) futures in forward months fell after the release of the official data on palm oil stocks, output and exports.

At noon, the Malaysian Palm Oil Board (MPOB) announced that end-July palm oil stocks rose – instead of easing – to 1,664,053 tonnes, which was 1% higher than June’s level of 1,647,604 tonnes.

Local July palm oil output jumped 18.21% month on month to 1,674,857 tonnes, while palm oil exports rose 0.53% month on month to 1,418,678 tonnes.

While stocks and output were higher than expected by the industry, exports were lower than estimated.

At 4.28 pm today, CPO futures for September delivery fell RM10 per tonne to RM2,316, October fell RM13 to RM2,284 while November fell RM18 to RM2,273. Trades done were 593, 9,383 and 7,154 lots respectively.

While acknowledging that the market was reacting to the data, Jim Teh of Interband Group of Companies noted the market had surged in the last two days on other “positive” news for the commodity.

“Although the MPOB data could be bad for sentiment, there could be some profit-taking as well. In the last two days, some months had gone up by more than RM120 per tonne,” the senior CPO futures broker told theedgemalaysia.com.

He observed there was no panic selling as trading volume was low for all the months. “Nothing to worry. At this price level, the PLANTATION [] owners will still be laughing to the bank,” he said.

CPO prices, which fell in July, regained ground recently after soybean production in U.S. was reported to be lower than forecast. The higher palm oil exports in the first 10 days of August had also spurred optimism.

The Interband broker expects the CPO futures market to fall sharper tomorrow but opined that other positive news – such as the economic recovery in the Euro-zone and more purchases of palm oil by Europe and China recently – could lend some support.

In a quick research note this afternoon, JF Apex Research said robust production of palm oil in the coming months of high production cycle is expected to weigh down the prices of the soft commodity.

It said: “We expect palm oil inventory to build up in the coming months in view of strong palm oil production ahead…we expect any excitement (for CPO) to be capped by the peak CPO production and keep the CPO price upside limited in the coming months.”

The research house said it is maintaining “neutral” on the plantation sector despite news that demand for palm oil will rise ahead of Mid-Autumn Festival (in September) and Deepavali (in early November).

“We remain neutral on the sector, as the robust CPO production ahead would weigh on CPO price while demand for palm oil will be supported by the restocking activity ahead of Mid-Autumn Festival and Deepavali.”

Independent cargo surveyor Intertek reported that palm oil export data for the first 10 days of August surged 18% as compared to the corresponding period in July as China and European countries imported more palm oil.