Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives ended the week sharply lower due to the anticipation of record high palm oil stocks and higher US soybean production.
The benchmark FCPO January contract dived RM180 or 7.21 per cent to close at RM2,316 per tonne on Friday from RM2,496 per tonne last Thursday.
The trading range for the week was from RM2,308 to RM2,448.
Total volume traded for the week amounted to 198,929 contracts, up 38,994 contracts from the previous week.
The open interest as at Thursday increased to 138,208 contracts from 133,402 contracts the previous Thursday.
A Reuters poll revealed on Tuesday that Malaysian palm oil stocks in October were expected to hit another record high at 2.67 million tonnes, an increase of 7.5 per cent from the previous month.
According to the poll, palm oil exports were estimated to surge 12 per cent to 1.69 million tonnes while the production would drop slightly from two million tonnes to 1.96 million tonnes.
Traders were also forecasting the palm oil exports for the first ten days of November might increase to the region of in between 515,000 to 518,000 tonnes.
On a separate issue, Indonesia was expected to have palm oil refining capacity of up to 30 million tonnes in 2013, higher than the country’s annual palm oil production of about 27 million to 28 million tonnes.
This was the effect from the restructuring in the Indonesian palm oil export tax last year which boosted new investments to build more plants and to increase the capacity of the current plants.
Meanwhile, USDA released its monthly report on soybean supply and demand on Friday with soybean ending stocks for 2012/13 increasing to 140 million bushels from 130 million bushels while the soybean production was forecasted at 2.971 billion bushels, up from 2.86 billion bushels in the previous report.
The Brazilian government had also increased its forecast for 2012/13 soybean production on Thursday at the record of between 80.1 and 83 million tonnes.
During an industry conference in Guangzhou, China on Thursday, Dorab Mistry maintained his forecast that crude palm oil prices would need to decline to RM2,200 per tonne within the next four to six weeks to attract demand for the tropical oils.
He added that the palm oil stocks could reach three million tonnes or more by early January.
On the economic front, the global markets’ indices fell this week on renewed concern over the US fiscal cliff issue after Obama was successfully continuing his term as the US President.
Traders would monitor closely on the measurements on how US would solve its fiscal cliff problems which would expire end of this year.
Technical View
The benchmark January contract plunged this week and would be expected to face heavy selling pressure next week.
The benchmark January will switch to February contract this coming Friday.
The previous low of RM2,230 would be monitored closely as it might be hit again next week.
Resistance would be pegged at RM2,490 and RM2,634 while support was set at RM2,230 and RM2,130.
Major fundamental news this coming week
MPOB’s monthly supply demand report on November 12, Malaysian export data for November 1 to November 10 by ITS on November 10 and by SGS on November 12 and the export figure for November 1 to November 15 by ITS and SGS on November 15.
Oriental Pacific Futures (OPF) is a Trading Participant and Clearing Participant of Bursa Malaysia Derivatives. You may reach us at www.opf.com.my
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