KUALA LUMPUR, June 1: Malaysian crude palm oil futures fell more than one per cent on Wednesday on a cocktail of concerns, from surging output to weak prices of rival soyaoil and a possible currency revaluation.
The benchmark contract broke through the key psychological support level of 1,400 ringgit a ton after hovering just above it since the start of the week. There are no local fundamentals to really support the market now and the CBOT is not helping, said a trader, referring to the Chicago Board of Trade, where soyaoil futures were mostly down in Wednesday’s electronic trade, extending losses sparked by profit-taking the previous day.
Soya and palm compete for export destinations and their prices often move in step. At Wednesday’s close, the benchmark third-month crude palm oil on Bursa Malaysia Derivatives, August, settled down 19 ringgit at 1,393 ringgit ($366.58) a tone.
Its low for the day was 1,401 ringgit and high 1,408. Other traded months settled down 11 to 21 ringgit. Volume was 4,337 lots of 25 tons each, lower than the 6,000 lots typically traded on a busy day.
Dealers said investors were worried that palm oil production could surge in coming months, overtaking demand. The market largely ignored estimates from a cargo surveyor on Tuesday that May shipments of palm oil could grow 18.6 per cent over April.
Analysts from five plantation companies surveyed by Reuters last week forecast a median of 1,284,346 tons for May output, against the record 1,246,938 tons officially seen in April. The state-run Malaysian Palm Oil Board will issue on June 10 official production, exports and closing stock numbers for May.
Constant speculation that Malaysia will revalue its ringgit — from the present fixed rate of 3.8 to the dollar — is also weighing on the market. In physical trade crude of palm oil, the June contract saw bids at 1,400 ringgit a ton in Malaysia’s southern region, against offers at 1,405.
In the central region, the same contract was bid/offered at 1,395/1,405 ringgit. Trades were reported for June at 1,415-1410 ringgit in the south and 1410-1405 in the central region.
The July contract saw bids/offers at 1,400/1,410 in the south and 1,395/1,410 in the central region. No trades were reported. —Reuters
