MALAYSIAN crude palm oil futures edged up 0.4 per cent by midday today, hitting a new high in just over 11 weeks, on concerns that heavy rains may cause a drop in output this month, traders said.
“Sentiment is positive. Now we are waiting for fundamentals to follow,” said a trader at a Kuala Lumpur-based brokerage.
“With the current rainy season, people are talking about how badly production will be affected rather than looking at stocks which, is a non factor as they will remain high,” the trader added.
Traders said heavy rains threatened to slash palm oil output by 25 per cent to 1.48 million tonnes this month as rising moisture levels sap yields and flooding makes it difficult to transport the vegetable oil to refineries and ports.
The market upside is, however, limited by refiners’ hesitancy to buy as they face margin squeeze after the recent rise in the ringgit currency as the dollar hovered near a 15-month low.
Refiners suffer forex losses when the ringgit strengthens as crude palm is bought in ringgit and its refined by-products are priced in the weaker U.S. dollar.
The benchmark February contract on Bursa Malaysia Derivatives Exchange was up RM10 at RM2,346 (US$698.21) per tonne, after going as high as RM2,370, a level not seen since Aug. 28.
Overall volume was about average at 5,694 lots of 25 tonnes each.
Other vegetable oil markets were mixed. Chicago Board of Trade soyoil for January delivery edged 0.6 lower while the most active Sept 2010 soybean oil contract on China’s Dalian Commodity Exchange rose 0.9 per cent.
Source : Business Times