Malaysian palm oil futures dropped as much as 1 percent on Monday, with trading range-bound as investors booked profits ahead of eagerly anticipated export data due later this week. The benchmark April 2011 crude palm oil contract on Bursa Malaysia Derivatives fell 0.6 percent to 3,933 Malaysian ringgit ($1,288) a tonne.
Overall, traded volume stood at 11,265 lots of 25 tonnes each, compared with a total of 11,568 lots on Friday. "Palm oil is down today," said one trader. "It is still range-bound trading between 3,900 to 3950 (ringgit). Volumes have been light." "Range-bound trading is expected, looking ahead of tomorrow's export figure coming out," he added.
Cargo surveyor Intertek Testing Services will issue February 1-15 palm oil exports from Malaysia on Tuesday. Another surveyor, Societe Generale de Surveillance, will publish the same data on Wednesday. On February 10, prices touched 3,967 ringgit, a peak not seen since March 2008 on concerns that seasonally heavy rains have stalled harvesting in top producers Indonesia and Malaysia. "In terms of fundamentals, it looks like the Malaysian palm oil board continues to indicate that production has been lagging and exports have been accelerating," said Alex Bos, a commodity analyst at Macquarie Bank. "In that environment, you would expect further price increases.
"That excess rainfall through the last half of 2010 and early 2011, will have some impact on near-term, but further out, that good moisture level should be beneficial for palm yields." Reaction to the export data could be delayed however, as Malaysian financial markets will be closed on Tuesday for a Muslim holiday.
ICDX's April CPO futures contract was at 11,495 rupiah ($1.287) per kg, compared to 11,450 rupiah per kg when it opened. Market volume was 1,385 lots of 10 tonnes each. Strong palm oil demand from emerging markets, such as China, continues to maintain the bullish price outlook. Global palm oil production stands at about 45 million tonnes per year, with China buying around 7 million tonnes.
Comparative vegetable oil supplies also remain a focus, with dry weather hitting major soyoil exporters in South American in recent months. Hot weather and heavy rains were forecast for most of Brazil's soybean belt in the coming week, continuing the trend of recent weeks, as maturing crops draw closer to harvest, local forecaster Somar predicted late on Friday.
"There is some profit taking after palm oil prices soared over the past one or two weeks," said a palm oil analyst. "What is most important is the South American soybean crops. "It is not progressing well - the drought conditions are still quite bad, although harvesting will be next month." The most-active September 2011 soyoil on the Dalian Commodity Exchange was at 10,886 yuan versus open at 10,880 yuan.
In related markets, US crude oil traded below $86 a barrel and near a 10-week low on Monday, as investors focused on ample supplies after the resignation of Egyptian President Hosni Mubarak eased concern of disruptions. Bursa Malaysia holds its annual Palm and Lauric Oils Conference & Exhibition Price Outlook 2011 on March 7-9, in Kuala Lumpur.