Weekly Crude Palm Oil Report February 3 2013


Technical Analysis for FCPO, FCPO Daily Chart Source: OPF Charting System

Crude palm oil futures (FCPO) on Bursa Ma­laysia Derivatives end­ed the week sharply higher due to weather concerns in South America and better prospects for exports demand in the coming months.

The benchmark FCPO April contract soared RM112 or 4.58 per cent to settle at RM2,557 per tonne on Thursday from RM2,445 per tonne last Friday. The trading range for the week was from RM2,446 to RM2,593.

Total volume traded for the week amounted to 99,735 con­tracts, down 47,232 contracts from the previous week.

The open interest as at Wednesday decreased to 169,897 contracts from 185,630 contracts the previous Wednesday.

The soybean prices fell early of the week as some weather forecasts predicted that there would be incoming benefi­cial rains over the weekend. Thereafter, the weather would turn hot and dry again early next week before rains return in the later part of the week.

However, some market par­ticipants remained concerned over the threat and recovery of the crops especially in Ar­gentina. The recent analysts’ reports cut the projection of Argentina’s soybean produc­tion due to hot and dry weath­er but increased the estimates of Brazil’s soybean crops from the previous forecast.

Traders would closely eye on how many inches of rains would fall in South America in the coming week. Any short­comings of rain could push the soybean prices higher or vice versa.

Malaysia on the other hand was experiencing heavy rains in some parts of the country. Recently, heavy rains oc­curred in Sarawak and no major disruption or dam­age to palm oil production so far.

However, the palm oil pro­duction would be expected to have a double digit fall in January due to lower yield. Traders were wait­ing for Reuter’s poll next week to get an indication of the upcoming palm oil’s supply-demand situation in Malaysia.

Meanwhile, exports were picking up at a faster rate during the last half of Janu­ary, signalling the demand may possibly start kicking in again after the Malaysian government implemented the zero-per cent export tax on crude palm oil since January 1, 2013.

Cargo surveyor ITS re­leased the palm oil export figures for the full month of January on Thursday at 1,458,475 tonnes, a drop of 7.02 per cent while another surveyor SGS at 1,421,865 tonnes, a fall of 6.38 per cent from the same period last month.

There were several ves­sels carrying palm oil cargo from Indonesia and Ma­laysia were successfully discharged at several ports in China recently, lifted the market sentiment and reduced concerns over the uncertainty of the new stringent rules on edible oils’ quality by the China’s custom.

Meanwhile, the Indone­sian government announced on Monday that its export tax on crude palm oil would be increased from 7.5 per cent to nine per cent for February month also boosted the Ma­laysian palm oil prices.

The China markets will be expected to slow down next week approaching the Chi­nese New Year which falls on February 10, 2013.

Technical View

The benchmark April contract had successfully broken few resistances and the bull trend resumed in the medium term.

The earlier target of RM2,745 to RM2,820 for this rally that we set in December will remain intact. Resist­ance is pegged at RM2,615 and RM2,755 while sup­port is set at RM2,512 and RM2,480.

Major fundamental news this coming week

United States Department of Agriculture (USDA)’s monthly supply-demand report on February 8, 2013.

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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