Weekly Crude Palm Oil Report March 25 2012

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Crude palm oil futures (FCPO) on Bursa Ma­laysia Derivatives ended the week higher due to continuous better demand outlook for palm oil despite concerns over the slow­down in the global economic growth.

The benchmark FCPO June contract increased RM28 or 0.82 per cent to close at RM3,426 per tonne on Friday from RM3,398 per tonne last Friday. The trading range for the week was from RM3,334 to RM3,436.

Total volume traded for the week amounted to 131,755 contracts, up 11,254 contracts from the previous week. The open interest as at Thursday decreased to 122,586 contracts from 131,180 contracts the previous Thursday.

Palm oil prices were weak­er during the beginning of the week as the export demand growth for the first 20 days of March was much slower than the first 15 days of March.

Cargo surveyor ITS re­leased the palm oil export fig­ures for the period of March 1 to 20 on Tuesday at 894,594 tonnes, an increase of 14.24 per cent while another sur­veyor SGS at 886,706 tonnes, a rise of 14.01 per cent from the same period last month.

The fall in palm oil prices were exacerbated on Thurs­day when the PMI Manufac­turing in China and Europe especially Germany and France was lower than the previous month.

The indicator for these three countries fell below 50 levels, signaling a slowdown in the economic growth which could reduce the com­modities demand.

However, the fundamental for palm oil remained sup­portive with the reduction in South American soybean output estimates and the anticipation of lower US soybean acreage in 2012 had underpinned the palm oil prices.

Traders would be closely monitoring the grain plant­ing forecasts released by USDA on March 30 which would give the traders infor­mation about the intention of the US farmers on the planting acreage of corn, soybean and wheat.

Traders were also con­cerned on the strike by the Argentina’s truck drivers which could disrupt the soy exports from the third largest soybean exporter in the world.

Indonesia would raise its export tax for crude palm oil from 16.5 per cent to 18 per cent in April which would be beneficial to the Malay­sian exporters as the global exportable palm oil supplies would be tightening up.

Technical View

The palm oil prices were weaker during the begin­ning of the week as some traders were taking their profits off the table ahead of the major fundamental reports which would be released next week. This was in tandem with the re­duction of 8,594 contracts in the open interest this week compared with the previous week.

The benchmark June con­tract turned around from the low of RM3,334 on Thurs­day and touched the new high of RM3,436 on Friday on strong technical buying and short covering.

However, palm oil prices would be trading more cautiously at high levels ap­proaching the major resist­ance of RM3,465 to RM3,500 while waiting for more cues from the major fundamental reports next week. Resist­ance was pegged at RM3,465 while support was set at RM3,350 and RM3,270.

Major fundamental news this coming week

Malaysian export data for March 1 to March 25 by ITS and SGS on March 26, the export data for Mar 1 to March 31 by ITS on March 31 and the Prospective Plant­ings reports by USDA on March 30.

Oriental Pacific Futures is a Trading Participant and Clearing Participant of Bursa Malaysia Derivatives. They can be reached at www.opf.com.my. Disclaimer: This article is written for general information only. The writers, publishers and OPF will not be held liable for any damage or trading losses that result from the use of this article.