Palm Oil Ends lower again as strong ringgit weighs, but exports support

Palm Oil Ends lower again as strong ringgit weighs, but exports support
Business & Markets 2013
Written by Reuters
Friday, 20 September 2013 20:11

* Malaysia Sept 1-20 palm oil exports up 9.2 pct -SGS
* Strong ringgit weighs on market, but good exports support-trader
* Prices post weekly loss of 2.2 pct, second week of declines
* Palm oil still targets 2,270 ringgit -technicals

KUALA LUMPUR (Sept 20): Malaysian palm oil futures fell for the third straight session on Friday and extended declines for a second week as a stronger local currency curbed appetite from overseas buyers, although strong export numbers limited losses.

Despite easing slightly, the ringgit was still near 3-month highs hit as it surged nearly 3 percent after the U.S. Federal Reserve's surprise decision not to taper its economic stimulus just yet.

But healthy exports in September reined in losses and kept prices in a tight range of 2,303-2,318 ringgit per tonne. Cargo surveyor Intertek Testing Services showed that shipments of Malaysian palm oil rose 13.1 percent to 996,377 tonnes during Sept. 1-20 compared to a month ago.

Another cargo surveyor, Societe Generale de Surveillance showed exports for the same period climbed 9.2 percent.

"The strong ringgit is definitely weighing on the market, both yesterday and today," said a trader with a foreign commodities brokerage in Kuala Lumpur.

"But the fact that prices went down so little shows the resilience and friendliness that the market feels towards palm oil," the trader added.

By Friday's close, the benchmark December contract on the Bursa Malaysia Derivatives Exchange had lost 0.9 percent to 2,297 ringgit ($725) per tonne, bringing prices down 2.2 percent for the week.

Total traded volumes stood at 21,822 lots of 25 tonnes each, much lower than the average 35,000 lots.

On the technical front, a bearish target at 2,270 ringgit per tonne remains unchanged for Malaysian palm oil as it has a better chance to break support at 2,311 ringgit, said Reuters market analyst Wang Tao.

Investors have turned bearish on forecasts that Southeast Asian palm oil output could start rising from September onwards, with the seasonally higher cycle seen dragging on until at least April 2014.

Expectations of bumper crops of competing oilseeds such as soybeans could cause a flood of edible oils in the market and depress prices in the coming months. Palm prices have already lost 5.8 percent so far this year -- extending declines into a
third year.

But palm oil exports seem to be holding for now, lending hope that the strong demand will eat into stocks and prevent inventories from surging to record levels last seen in December.

Stocks at end-August stood at 1.67 million tonnes.

Prices could also get support from rising Indian demand.

Edible oil imports of the world's top buyer are likely to rise 4 percent to a record 10.7 million tonnes in 2013/14 due to rapid growth in consumption, with the entire rise met by palm oil, a leading trade expert said on Friday.

In other markets, oil edged up to $109 a barrel on Friday, supported by the Federal Reserve's decision this week to leave its stimulus programme unchanged, falling U.S. crude inventories and persistent concerns about supplies.

The U.S. soyoil contract for December fell 0.9 percent in late Asian trade.

The Dalian Commodities Exchange will resume trading on Monday after closing from Sept. 19 for the mid-autumnfestival.