PETALING JAYA: Crude palm oil (CPO) futures on Bursa DerivativesExchange extended its rally yesterday but finished short of the much desired RM2,500 per tonne mark.
Analysts however, remain optimistic that CPO prices in the short term could see an upside of about 10% to 14%, closely tracking the performance of soy oil and crude oil prices amid the weakening US dollar.
Yesterday, the benchmark February CPO contract hit an intra-day high of RM2,516 per tonne – the highest since Aug 13 – before closing RM4 higher at RM2,482 per tonne from Tuesday’s close of RM2,478 per tonne.
A CPO futures trader told StarBiz that CPO prices would continue to gain momentum on positive factors such as the current abnormal heavy rainfall that would affect production in the coming months and encouraging exports for November. This was despite the two million tonnes CPO inventory in October reported by the Malaysian Palm Oil Board – the highest recorded since January.
“CPO is still the world’s most tradeable edible oil with continued strong demand in India, China and the United States mainly for food-related industries,” the trader said.
Both independent cargo surveryors Intertex and Societe Generale de Surveillance (SGS) yesterday reported higher CPO exports for Nov 1-25. Intertek said Malaysia’s palm oil exports rose 1.2% to 1.13 million tonnes while SGS reported 1.18 million tonnes, up 6.4% from October.
An analyst with a foreign brokerage said Malaysia would remain the world’s largest exporter of palm oil despite Indonesia being the largest producer.
“I believe CPO price in the fourth quarter will trade at US$650 to US$700 per tonne on the strengthening El Nino, no near term import tariff on CPO by India and expectation of higher biodiesel demand,” he added.
The CPO price so far this year has gained about 48%. Over the past three months, it is up by about 10%.
The analyst noted the market for “now” seemed to be discounting key risk factors like the potential bumper soybean crop from Brazil in 2010.
Furthermore, Malaysia’s CPO stocks at 2 million tonnes in October were also nearing the highest recorded at 2.3 million tonnes in November 2008. Indonesia’s stockpile is also on the rise at 1.7 million tonnes in October.
Indonesian Palm Oil Board had indicated that its palm oil production for 2010 was targeted to increase to 21.5 million versus 20 million tonnes in 2009.
Source : Business Times