Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives further increased this week, anticipating slower palm oil production and expecting better exports demand which would further trim the palm oil stocks in May.
The benchmark FCPO August contract rose RM26 or 1.10 per cent to settle at RM2,397 per tonne on Friday from RM2,371 per tonne last Thursday.
The trading range for the week was from RM2,366 to RM2,420.
Total volume traded for the week amounted to 121,467 contracts, down 16,641 contracts from the previous week.
The open interest as at Thursday decreased to 174,134 contracts from 183,019 contracts the previous Thursday.
The exports in May did improve slightly compared with the first 20 days of May with some increase in demand from India and Pakistan.
However, the demand from China and European Union countries remained slow which offset the overall increase in exports.
The cargo surveyor ITS released the palm oil export figures for the full month of May on Friday at 1,262,281 tonnes, a fall of 3.28 per cent while another surveyor SGS at 1,248,014 tonnes, a decrease of 3.43 per cent from the same period last month.
Some analysts estimated the production in May and June would be stagnant to slightly lower and may fall further in July as most of the field workers may slow down their productivity during fasting month.
If the exports demand in June turned out not as rosy as expected, partly due to the stiff competition from Indonesia, the overall projection for palm oil stocks in Malaysia may not go lower as forecasted.
Meanwhile, the crop planting in US further progressed in the latest week but was disrupted by the heavy rains towards the weekend.
The latest weather forecast showed that there would be heavy rainfalls in the week ahead which would slowdown the US corn and soybean plantings in the coming week.
In addition, there may be floods occur in low-lying areas which may harm the crops and lower the yield.
The latest crop progress released by US Department of Agriculture showed that soybean planting as at May 26 was 44 per cent complete versus 24 per cent the previous week and was still below the five years average of 61 per cent complete.
The uncertainties of the crops planting in US due to unfavourable weather condition and their planting progress would be monitored closely from time to time as to gauge whether it would give a huge impact to the production this year.
The performance in the global equities this week seemed not so good from technical point of view as the closing of the major global indices broke its recent low, signalling more downside may be on the way in the coming weeks.
The uncertainties in the recent movement in the global equities should be paid more attention as it may give some impact to the price movement in the global commodities.
Technical View
The benchmark August contract currently remained in the uptrend channel. Support and resistance of the channel would be monitored continuously.
As long as the support of the channel is not broken down, the current rally will continue.
Resistance would be pegged at RM2,420 and RM2,467 while support was set at RM2,360 and RM2,250.
Major fundamental news this coming week Reuter’s poll on the Malaysian palm oil supply and demand for May.
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.