Vegoils Palm ends lower on demand worry, but flood-affected output caps losses

Vegoils Palm ends lower on demand worry, but flood-affected output caps losses
Business & Markets 2013
Written by Reuters  
Thursday, 12 December 2013 20:30

(12/12/13 19:53:27)

* Prices fall for third straight day, on Thursday
* Market under pressure from narrowing spread to soyoil, weaker export demand -trader
* Palm olein's discount to soyoil down to $67, from $300 early 2013
* Palm output in southern Malaysia fell 28.8 pct m/m in Dec 1-10

KUALA LUMPUR (Dec 12): Malaysian palm oil futures ended lower for the third straight day on Thursday, reversing some gains made in the morning session, on worries of sluggish demand, but prospects of tighter supply from flood-affected areas helped curb losses.

Benchmark palm prices have gained about 7 percent so far this year, narrowing palm olein's discount to competing soyoil from about $300 at the start of the year, to just $67 currently.

A smaller spread could prompt buyers to switch to rival soyoil.

"What's bringing the market down is the worry of the narrowing discount to soybean oil, high stocks in November and easing floods," said a trader with a local commodities brokerage in Malaysia.

"But prices are not breaking below 2,600 ringgit, because of smaller palm output," the trader added.

The benchmark February contract on the Bursa Malaysia Derivatives Exchange had inched down 0.7 percent to 2,612 ringgit ($809) per tonne by Thursday's close, easing from a high of 2,657 ringgit hit in the early session.  

Total traded volume stood at 32,392 lots of 25 tonnes — slightly below the average 35,000 lots.

Floods in several palm-growing parts of Malaysia have disrupted harvesting and transport of fresh fruit this month. A group of millers on Thursday, said output in southern Malaysia during Dec 1-10, fell nearly 30 percent from a month ago.

Plantation workers are unable to harvest much during the rainy monsoon season, while palm oil lorries face problems transporting the fresh fruit bunches to mills, as roads are either cut off or too muddy.

Water levels have receded in most of the worst flood-hit areas for now, according to local media reports, although the wet weather is expected to stretch until March.

Palm oil output also typically slows from November onwards, as a seasonal high-cycle fades and trees enter a resting period.

But weak demand from palm's biggest buyers could keep stockpiles elevated at the current 1.98 million tonnes, and weigh on prices.

"Exports are bad. The main two pillars India and China have been quiet — looks like they are well-stocked up or have enough of their domestic crop," the trader said.

India — the world's leading palm oil buyer, imported 774,207 tonnes last month — down 1 percent from the 782,467 tonnes shipped in October, India's Solvent Extractors' Association (SEA) said in a statement, on Thursday.

Data from cargo surveyors showed that Malaysian palm oil exports fell nearly 30 percent in the Dec 10 period, compared to a month ago.

In other markets, Brent oil futures fell below $109.50 a barrel on Thursday, on several bearish signals, including the possible re-opening of major Libyan ports this weekend and expectations that the U.S. Federal Reserve may soon unwind a stimulus programme.

In other competing markets, the U.S. soyoil contract for January rose 0.2 percent, in late Asian trade. The most active May soybean oil contract on the Dalian Commodities Exchange, fell 0.5 percent.

Palm, soy and crude oil prices at 1038 GMT
Contract	Month	Last	Change	Low	High	Volume
MY PALM OIL	DEC3	0	-19.00	0	0	0
MY PALM OIL	JAN4	2598	-19.00	2597	2640	1256
MY PALM OIL	FEB4	2612	-18.00	2611	2657	15486
CHINA PALM OLEIN	MAY4	6206	-24.00	6192	6278	772540
CHINA SOYOIL	MAY4	7196	-38.00	7190	7272	724798
CBOT SOY OIL	JAN4	40.30	-0.10	40.21	40.49	4755
NYMEX CRUDE	JAN4	97.52	+0.08	97.31	97.61	9225

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=3.23 Malaysian ringgit)