KUALA LUMPUR (Oct 8): Malaysian palm oil futures stretched their winning streak into a third day on Wednesday, as the ringgit fell and as investors expected output to drop this month, although a fall in crude oil prices hampered gains.
Planters and traders said palm oil output in the world's second biggest producer Malaysia may ease in October as wet weather delays harvesting and crimps oil extraction rates from fresh fruit, indicating that production growth could have already peaked in August.
"The market is drudging along with mixed sentiments. The bullish factors are the weaker ringgit, lower output, and weather vagaries in November and December," said a trader with a local commodities brokerage in Malaysia.
But worries of bigger competition from the huge U.S. and South American soybean crop alongside "anaemic" food and fuel demand during the northern hemisphere winter weighed on the tropical oil.
"With these factors, the market will remain sideways until more is known about MPOB's data," the trader added.
The benchmark December contract on the Bursa Malaysia Derivatives Exchange had edged up 0.8 percent to 2,197 ringgit ($671) per tonne by the day's close.
The Malaysian ringgit slipped on Wednesday as traders covered short positions in the greeback, and was trading at 3.2715 per U.S. dollar by 1022 GMT, making the ringgit-priced palm feedstock cheaper for international buyers.
Total traded volume stood at 45,039 lots of 25 tonnes each, higher than the average 35,000 lots.
Technicals showed palm oil is expected to test resistance at 2,224 ringgit per tonne, with a good chance of breaking above this level and rising more to 2,262 ringgit, said Reuters market analyst Wang Tao.
Brent crude oil dipped below $91 a barrel on Wednesday to its lowest since June 2012 as lower economic growth forecasts raised new concerns about global oil demand at a time of abundant supply.
Lower crude prices take some fuel demand from palm as it makes the tropical oil a less attractive option for biodiesel feedstock.
"Palm oil did bounce up partly because it was so cheap as a fuel, but crude oil is drifting down it seems. In the background you cannot forget that this is helping to set the base level for the palm oil price," James Fry, chairman of commodities consultancy LMC International told Reuters on the sidelines of a oilseeds conference in Barcelona on Tuesday.
"If I was in the palm, rapeseed or sun market, every morning I would wake up and look at the Brent crude price and only then start worrying about supply and demand," he added.
Official data on stocks, output and exports for end-September will be released by industry regulator the Malaysian Palm Oil Board (MPOB) on Friday.
A Reuters poll had showed palm oil stocks in Malaysia expected to hold at 2.05 million tonnes at end-September, as a removal of export taxes failed to boost shipments as much as initially expected.
The survey estimated that crude palm oil production in September fell 8 percent to 1.87 million tonnes, weakening after August's surge of 22 percent to 2.03 million tonnes.
Palm oil output may continue to fall in October due to wet weather, industry players said.
The Malaysian Meteorological Department said the current "inter-monsoon season", marked by frequent thunderstorms in the afternoon, will likely carry on until early or mid-November before the wetter northeast monsoon unfurls.
Palm output typically drops in the wet season towards the end of the year as heavy rains and floods complicate harvesting and transportation of fruit to mills.
The U.S. soyoil contract for December shed 0.3 percent in late Asian trade. The most active January soybean oil contract on the Dalian Commodities Exchange was nearly flat after reopening from the one-week National Day holiday.
Palm, soy and crude oil prices at 1023 GMT
Contract Month Last Change Low High Volume
MY PALM OIL OCT4 2220 +18.00 2220 2225 40
MY PALM OIL NOV4 2213 +18.00 2193 2223 2136
MY PALM OIL DEC4 2197 +17.00 2178 2209 23649
CHINA PALM OLEIN JAN5 5238 +16.00 5214 5270 211470
CHINA SOYOIL JAN5 5922 +2.00 5910 5958 253466
CBOT SOY OIL DEC4 33.04 -2.70 32.91 33.27 6281
INDIA PALM OIL OCT4 457.30 -2.70 455.50 461.00 511
INDIA SOYOIL OCT4 607.45 -0.05 606.00 608.90 15025
NYMEX CRUDE NOV4 87.90 -0.95 87.39 88.63 36979
Palm oil prices in Malaysian ringgit per tonne
CBOT soy oil in U.S. cents per pound
Dalian soy oil and RBD palm olein in Chinese yuan per tonne
India soy oil in Indian rupee per 10 kg
Crude in U.S. dollars per barrel
($1 = 3.2715 Malaysian ringgit)
($1 = 6.1390 Chinese yuan)
($1 = 61.39 Indian rupees)