Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives plunged this week due to slowdown in palm oil demand and better weather condition in South America.
The benchmark FCPO May contract dived RM166 or 6.55 per cent to settle at RM2,368 per tonne on Friday from RM2,534 per tonne last Friday.
The trading range for the week was from RM2,367 to RM2,482.
Total volume traded for the week amounted to 197,275 contracts, up 49,168 contracts from the previous week.
The open interest as at Thursday increased to 169,795 contracts from 167,287 contracts the previous Thursday.
Cargo surveyor ITS released the palm oil export figures for the full month of February on Thursday at 1,326,420 tonnes, a fall of 9.05 per cent while another surveyor SGS at 1,297,320 tonnes, a drop of 8.76 per cent from the same period last month.
The slowdown in exports for February month was acceptable as it was a short month.
The key point now was depending on the supply side.
Preliminary estimation of palm oil production for February would be a double-digit fall.
The palm oil stocks would still be expected to reduce in the coming months.
However, the stocks probably might be hard to fall below two million tonnes based on the current pace of the exports demand.
More boost in exports growth is needed in order to bring the stocks down to a much lower level.
The implementation of 4.5 per cent export tax for crude palm oil in March would also be a challenge to further boost the demand for the tropical oil.
Industry players will focus on the price forecast by top analysts during the annual palm oil price outlook conference in Kuala Lumpur, Malaysia next week.
This annual conference is organised by Bursa Malaysia Derivatives and would be held from March 4 to March 6, 2013.
Top industry analysts like Dorab Mistry and James Fry would be scheduled to present their papers in the afternoon on March 6, 2013.
On the other hand, the weather in South America has improved a lot for the past one week.
Wide scattered rains were seen falling across Argentina, bringing the needed moisture to key soybean producing areas.
The timely rains were able to halt the deteriorating conditions of the soybean crops in Argentina while improving soy yields in Brazil.
The grain exchange in Argentina reduced its estimate on soybean production for 2012/13 from 50 million tonnes to 48.5 million tonnes in its latest report due to lower yields caused by unfavourable weather condition.
The benchmark may contract plunged this week once the uptrend channel support at RM2,513 was broken.
Selling pressure was heavy for the past one week and the palm oil prices were down for five consecutive days.
All technical indicators currently are showing sell signals but some of the indicators were in the oversold level.
Palm oil market is expected to be quiet and range-bound during the beginning of the week as most traders and the industry players are away, attending the palm oil conference in Kuala Lumpur next week.
Resistance will be pegged at RM2,476 and RM2,527 while support was set at RM2,332 and RM2,285.
Major fundamental news this coming week
The US Department of Agriculture’s monthly supply-demand report on March 8 and Reuter’s poll on Malaysian demand and supply.
Oriental Pacific Futures (OPF) is a Trading Participant and Clearing Participant of Bursa Malaysia Derivatives. You may reach us 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.