CPO Prices Up

PETALING JAYA: Crude palm oil (CPO) futures rose to a two-week high
yesterday on expectations of higher overseas demand for the commodity.

Meanwhile, the rally on the local rubber market cooled down as

China’s purchases of rubber slowed ahead of the Chinese New Year

celebration next week.

The benchmark April CPO futures contract

advanced RM12 to close at RM2,510 per tonne. Tyre-grade Standard

Malaysian Rubber (SMR) 20 added one sen to RM10.09 per kg and

Latex-in-Bulk rose 35 sen to RM6.98 per kg respectively.

On the performance of CPO, a

trader expects the high palm oil end-stockpiles in December of about

2.24 million tonnes could be substantially reduced in January, given

higher overseas demand.

Independent cargo surveyors recently

reported a 23.9% month-on-month increase in local palm oil exports for

January. The Malaysian Palm Oil Board is expected to release its January

2010 statistics on stocks, production and export next week.

Citi

Investment Research analyst Penny Yaw said in the firm’s latest

plantation report that the average CPO price year-to-date was around

US$740 or RM2,498 per tonne.

“We forecast CPO prices will average

US$760 from the previous estimate of US$650 per tonne in 2010 and

US$800 per tonne from the previous estimate of US$500 in the long term,

factoring in favourable demand and supply interplay,” she said.

Oil

World has forecast demand to outstrip supply growth in the major world

oils and fats markets.

In addition, the world climate change

could affect water availability, leading to droughts and floods which

would take a toll on crops.

China and India, which account for

30% of world consumption of edible oils, are vulnerable to extreme

weather changes.

Any potential shortfall in supply would have a

positive impact on prices of vegetable oils, Yaw said.

Other key

factors supporting CPO prices include slower production due to active

replanting in Malaysia, the impact of El Nino in the coming months and

expectations of a weaker US dollar which may lead to higher commodity

prices.

As for rubber, Jupiter Securities head of research Pong

Teng Siew said: “It will be interesting to know whether demand from

China, the world’s largest rubber importer, will continue without its

government stimulus spending measures.”

He said China was seen

stockpiling on rubber since late last year but has since gradually

slowed down, adding that it could be due to the upcoming Chinese New

Year festival where most of its automotive plants would shut down for

the celebration.

“It is said that most governments’ stimulus

packages would have come to an end by the first half of 2009. My concern

is that once China’s stimulus package stops, what will happen to the

big demand for commodities like rubber and CPO?” Pong said.

A

rubber trader told StarBiz that world rubber prices would not

likely fall significantly this year amid the current tight supply

situation.

Furthermore, the three major producing nations –

Thailand, Indonesia and Malaysia – have plans to limit the drop in

rubber prices should it fall below US$2 per kg.

“These countries

will make sure that rubber price stays above US$2 per kg to ensure that

the price is higher that the cost of production of their rubber

smallholders,” the trader said.

Thailand is proposing to other

producing nations not to sell rubber should the price fall below US$2.60

per kg.

Source : The Star by Hanim Adnan

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