Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives ended the week lower due to bearish monthly reports released by both the Malaysian Palm Oil Board (MPOB) and the US Department of Agriculture (USDA).
The benchmark FCPO March contract tumbled RM60 or 1.87 per cent to close at RM3,151 per tonne on Friday from RM3,211 per tonne last Friday.
The trading range for the week was from RM3,143 to RM3,240. Total volume traded for the week amounted to 99,439 contracts, up 24,762 contracts from the previous week. The open interest as at Thursday increased to 115,389 contracts from 114,558 contracts the previous Thursday.
MPOB released its monthly reports on Malaysian palm oil’s supply and demand for December 2011 on Tuesday with palm oil stocks declining to 2.039 million tonnes from 2.07 million tonnes the previous month as the drop in production outpaced the fall in exports demand.
However, the stocks level was well above the Reuters’ poll estimation of 1.95 million tonnes. The exports in December fell 4.49 per cent to 1.59 million tonnes while the palm oil production slumped 8.16 per cent to 1.495 million tonnes.
USDA released another surprised bearish monthly report on soybean supply and demand on Thursday with soybean ending stocks jumped to 275 million bushels from 230 million in the previous report.
The ending stocks figure was also well above the average market expectation of 233 million bushels.
Cargo surveyor ITS released the palm oil export figures for the period of Jan 1 to 10 on Tuesday at 371,635 tonnes, a drop of 16.24 per cent while another surveyor SGS at 352,800 tonnes and a decrease of 19.2 per cent from the same period last month.
The significant fall in export demand was mainly due to the slowdown of more than 60 per cent drop in exports to European Union countries.
The Malaysian Meteorological Department issued an orange stage warning on Friday that heavy rains were expected to fall in a few areas in Pahang and Johor until January 14.
Rains in Argentina for the past few days had temporarily brought relief to the drought condition in its grain areas.
The dry condition in Argentina is expected to return during the beginning of the week while scattered showers and heavier rains would move in later during the weekend.
Standard & Poor’s downgraded the credit ratings of nine eurozone countries on Friday including France and Austria from their triple-A status.
The US grain markets will be closed on Monday celebrating Martin Luther King Day.
Technical View
The benchmark March contract closed below RM3,164 for the week indicating the buying momentum faded amid unexpected bearish monthly reports from Malaysia and US.
The benchmark month will change to April contract on Monday.
The weak closing would drive palm oil prices further lower probably to cover the gap at RM3,097-RM3,112. Resistance would be pegged at RM3,270 while support was set at RM3,080 and RM3,000.
Major fundamental news this coming week
Malaysian export data for Jan 1 to 15 by ITS and SGS on January 16 and export data for Jan 1 to 20 on January 20.
Market expectation for the export demand for the period of Jan 1 to 15 was 600,000 to 620,000 tonnes.