Palm oil firms ahead of USDA report

JAKARTA: Malaysian palm oil futures traded near one-month highs on Monday, in line with other vegetable oil markets, as investors positioned themselves ahead of key industry data from the United States.

Benchmark November palm oil on the Bursa Malaysia Derivatives Exchange ended up 0.7 percent at 3,071 Malaysian ringgit ($1,023) per tonne. Prices earlier hit a peak at 3,076.

Exchange volumes for the November contract were thin at 5,862 lots of 25 tonnes each versus 7,895 lots on Friday.

"The market today is pretty firm," said a Kula Lumpur-based trader. "Everyone expected the market to be down."

"There is a huge premium on soyoil over Malaysian palm oil," he added. "Even today, crude oil drops and soybean oil doesn't drop -- palm is more or less tracking soybeans."

The US Department of Agriculture's supply-demand report, due on Monday at 1230 GMT, will update the agency's crop forecasts in the light of hot and dry weather hurting US soy yields that could lift soyoil's premium to palm oil.

Soybeans rose for a second straight session ahead of the report, while the most active May 2012 soy oil on China's Dalian Commodity Exchange also climbed.

"It should be positive for palm oil because everyone knows the yield for soybean is coming down -- it should be friendly," said the trader.

Capping gains however, oil fell on Monday on deepening concerns over Europe's sovereign debt crisis and slowing global growth.

Also hitting sentiment, the Nikkei average skidded more than 2 percent to a fresh 2-1/2 year closing low on concerns that Europe's sovereign debt woes and falls in US share prices will deepen.

Soybean futures have been largely insulated from the economic crisis as hot weather in the United States, the world's top exporter of grains and oilseeds, is expected to further tighten world supplies.

Malaysia's August palm oil stocks fell 5.6 percent to 1,884,560 tonnes from a revised 1,996,396 tonnes in July, industry regulator Malaysian Palm Oil Board said.

"MPOB came out on the friendly side," said a Singapore-based trader. "Everybody is taking some protection against the (USDA) report.

"After the USDA report, I expect down downward pressure, what with the weaker macro economic side," he added.

Exports of Malaysian palm oil products for Sept. 1-10 fell 36 percent to 389,069 tonnes from 608,236 tonnes shipped during Aug. 1-10, cargo surveyor Societe Generale de Surveillance said.

"Good for the market -- especially the stock levels," said a Jakarta-based trader.

In other news, capitalising on an export tax cut by Indonesia, India is likely to have bought more palm oil in August at the cost of soyoil imports which may have halved compared to the previous month, a Reuters survey showed.

Indonesia reduced the export tax cap on palmolein products (downstream) to 13 percent from 25 percent in August, making imports of refined products cheaper and crude products costlier for countries like India.

Copyright Reuters, 2011