Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives ended the week slightly higher in choppy trading as traders were positioning themselves ahead of the major reports from the US Department of Agriculture (USDA).
The benchmark FCPO June contract increased RM7 or 0.03 per cent to close at RM3,433 per tonne on Friday from RM3,426 per tonne last Friday. The trading range for the week was from RM3,426 to RM3,497.
Total volume traded for the week amounted to 106,277 contracts, down 25,478 contracts from the previous week. The open interest as at Thursday increased to 125,871 contracts from 122,586 contracts the previous Thursday.
USDA released its Prospective Plantings report on Friday indicating that farmers intended to shift more acreage to corn at the expense of soybean and wheat in 2012 as the return from corn remained higher compared with soybean and wheat at the current price.
Farmers intended to plant 95.9 million acres of corn in 2012, up four per cent from 2011 which was above the average analyst expectations of 94.72 million acres. According to USDA, the corn acreage in 2012 would be the highest in US since 1937 if it was realised.
Soybean acreage in 2012 was expected to be down one per cent from 2011 at 73.9 million acres, below the average market expectations of 75.4 million acres while wheat acreage was estimated to be up three per cent from last year at 55.9 million acres.
Meanwhile, USDA also released its Grain Stocks reports the same day saying that the corn stocks was down eight per cent as at March 1, 2012 compared with the previous year. The solid demand in corn for the past year further tightened the stocks supply.
However, the soybean stocks increased 10 per cent as at March 1, 2012 versus last year where soybean demand was slightly down for the past year.
Palm oil market would likely remain firm as traders expected the palm oil exports in March would touch 1.23 million tonnes while the production in March would be estimated to be down seven to eight per cent. This would further reduce palm oil stocks in the coming months.
Dorab Mistry, the famous vegoils analyst, maintained his forecast for palm oil prices during a conference in Beijing on Wednesday where palm oil prices would reach RM4,000 per tonne by the end of June as strong demand would remain high during the second quarter especially approaching the Muslim festive season in June.
Cargo surveyor ITS released the palm oil export figures for the period of March 1 to 25 on Monday at 1,068,774 tonnes, an increase of 7.7 per cent while another surveyor SGS at 1,055,071 tonnes, a rise of 6.59 per cent from the same period last month.
Technical View
The benchmark June contract was in technical correction mode this week after the strong rally reaching the high of RM3,497 on Tuesday.
The bullish reports released by the USDA would further push the palm oil prices to higher level. We expect the palm oil trading range would be lifted to RM3,465 to RM3,700 in the coming months. Resistance would be pegged at RM3,465 and RM3,700 while support was set at RM3,350 and RM3,270.
Major fundamental news this coming week
Malaysian export data for the full month of March by SGS on April 2.
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.