Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives extended its rally this week boosted by the continuous talks on rising demand and tighter global edible oils supply.
The benchmark FCPO June contract soared RM171 or 4.98 per cent to close at RM3,604 per tonne on Friday from RM3,433 per tonne last Friday. The trading range for the week was from RM3,501 to RM3,607.
Total volume traded for the week amounted to 105,661 contracts, down 616 contracts from the previous week. The open interest as at Thursday decreased to 120,728 contracts from 125,871 contracts the previous Thursday.
The Prospective Plantings report released by US Department of Agriculture (USDA) last Friday indicating farmers would plant more corn and fewer soybeans had pushed soybean prices further up to fight for more acreage this planting season.
The anticipation of lower US soybeans production this year limited the availability of the oilseed to produce soyoil, resulting a further tightening supply in the global edible oils.
In addition, some analysts further cut the soybean production for another 1.5 million to two million tonnes in Brazil and Argentina from their previous estimates due to unfavourable weather condition, leading to an even tighter global supply currently.
Traders would be closely monitoring the palm oil stocks level in March and the export demand growth in April from the major reports released by the Malaysian Palm Oil Board (MPOB) and cargo surveyors next Tuesday.
A Reuters poll revealed on Friday that Malaysian palm oil stocks were likely to fall in March from the previous month as the growth in export demand outpaced the increase in production.
According to the poll, palm oil stocks in March were expected to reduce 3.5 per cent to 1.99 million tonnes. Meanwhile, the palm oil exports were estimated to increase 5.7 per cent to 1.28 million tonnes while the production would rise two per cent to 1.21 million tonnes.
Cargo surveyor ITS released the palm oil export figures for the full month of March last Saturday at 1,233,444 tonnes, an increase of 4.77 per cent while another surveyor SGS reported their export data on Monday at 1,211,211 tonnes, a rise of 3.46 per cent from the same period last month.
However, traders would also pay attention to the development of the eurozone debt crisis as the sales of Spanish bond on Wednesday was disappointing with their bond yield shooting to record high, raising worries over the contagion of the eurozone debt crisis again. The Malaysian market will be closed on April 11 celebrating the Installation of the Malaysian King.
Technical View
The benchmark June contract was once again pushed to the highest level of RM3,607 this week, a level not seen since March 2011 due to the bullish USDA report.
However, we believed the market would be strongly capped at RM3,700 to RM3,735 level based on the current fundamental scenario and it should be due for correction if the palm oil prices reach the RM3,700 levels next week. Resistance would be pegged at RM3,700 to RM3,735 while support was set at RM3,445 to RM3,465.
Major fundamental news this coming week
MPOB’s monthly supply-demand report on April 10, Malaysian export data for April 1 to April 10 by ITS and SGS on April 10 and USDA’s monthly supply-demand report on April 10.
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.