Palm tracks weak overseas veg oil markets, strong exports cap losses

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(Vegoils Update 2: Wed 10/09/14 18:30:47)

KUALA LUMPUR/JAKARTA (Sept 10): Malaysian palm oil futures inched lower on Wednesday, tracking losses in crude and vegetable oil markets overseas, with investors bracing for forecasts of bigger global oilseed supplies, although a surge in palm export curbed losses.

Cargo surveyor Intertek Testing Services reported that exports of Malaysian palm oil products during Sept 1-10 jumped 40.6 percent to 487,955 tonnes, compared to the same period a month ago, with shipments of the crude grade more than doubling.

The rise in exports comes after Malaysia said it will scrap export duty for crude palm oil for September and October, in a move to encourage overseas sales from the No.2 producer.

But the increase in export demand might not be enough to immediately turn around prices, which have slumped 25 percent so far in 2014, traders said.

"The problem is that soybean oil and Dalian palm olein are still trading at the low side. So, how is palm going to go up?

It (the export rise) can only cushion the market temporarily," said a trader with a foreign commodities brokerage in Kuala Lumpur.

By Wednesday's close, the benchmark November contract on the Bursa Malaysia Derivatives Exchange had slipped 0.1 percent to 2,032 ringgit ($635) per tonne, after falling to 1,997 ringgit in early trade. Total traded volume stood at 47,010 lots of 25 tonnes — above the daily average of 35,000 lots.

Data from the Malaysian Palm Oil Board, released after the midday break, showed that end-August palm oil stocks in the No.2 producer surged 22 percent to 2.05 million tonnes, to their highest since March 2013, amid softer demand.

In overseas markets commonly tracked by palm, the U.S. soyoil contract for December inched down 0.09 percent in Asian trade, while the most active January soybean oil contract on the Dalian Commodities Exchange shed 1.93 percent.

Chicago Board of Trade November soybeans slid to a contract low of $9.90-3/4 per bushel on Wednesday, as near-perfect weather in the U.S. Midwest raised expectations that the government will further increase production estimates.

"It's not only palm — most of the agricultural commodities are very depressed. Palm oil was not spared," the Kuala Lumpur-based trader added.

RHB Research Institute cut its forecast for 2014 average crude palm oil prices to 2,400 ringgit per tonne, from 2,700 ringgit previously, but said palm prices could strengthen in the fourth quarter of the year.

"We believe palm prices are weeks away from a bottom and should strengthen in 4Q, as well as in 2015," RHB said in research note.

"That said, the current low levels will pull down the full-year average, hence the cut in our assumptions," RHB added.

Forecasts for average 2015 prices were cut to 2,500 ringgit, from 2,900 ringgit.

Societe Generale de Surveillance, another cargo surveyor, will release August export data later on Wednesday.

In other markets, Brent crude dropped to a 16-month low under $99 per barrel on Wednesday, stretching its losses into a fifth session, amid continued worries about rising supplies and weak global demand.

Palm, soy and crude oil prices at 1001 GMT

Contract        Month    Last   Change     Low    High  Volume
MY PALM OIL      SEP4    2040   -10.00    2023    2040      14
MY PALM OIL      OCT4    2045    +0.00    2012    2045    1896
MY PALM OIL      NOV4    2032    -2.00    1997    2035   19960
CHINA PALM OLEIN JAN5    5130   -82.00    5090    5196  731582
CHINA SOYOIL     JAN5    5884  -116.00    5872    5944  509176
CBOT SOY OIL     DEC4   31.75    +0.03   31.52   31.82    7620
NYMEX CRUDE      OCT4   93.01    +0.26   92.50   93.03   21702

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
Crude in U.S. dollars per barrel
($1 = 3.20 Malaysian ringgit)
($1 = 6.137 Chinese yuan)
($1 = 60.81 Indian rupee)