CPO Futures Likely to be Lower Amid Exports Concern

CRUDE palm oil futures on Bursa Malaysia Derivatives is likely to be lower this week due to rising concerns that the stronger ringgit may make local exports less competitive, dealers said. Demand for CPO is also expected to subside as many countries, especially in the Middle East, have stocked up their needs for the upcoming Hari Raya Aidilfitri, said Interband Group of Companies senior palm oil trader Jim Teh. The ringgit appreciated further after Bank Negara announced midweek moves to further liberalise the local currency which will see the ringgit being used in trade settlements. This subsequently pushed the local unit to a 28-month high on Thursday after recording the highest level since April 28, 2008. It was traded at 3.1280 to the US dollar at the opening.

As for demand for CPO, Teh said demand would likely be lower in the coming weeks especially with commodity prices currently at higher levels. “We are satisfied with prices now which are hovering at about RM2,500 per tonne. For producers, it means they are getting 100 per cent returns as opposed to the cost of production which is at about RM1,200 to RM1,500 per tonne,” he said. However, if India – the second largest consumer of vegetable oils, continues to increase their exports in the coming months, it will likely be a boost to the local market, he said. Teh said the price is expected to move between RM2,500 per tonne and RM2,550 per tonne. On a Friday-to-Friday basis, September 2010 contract dropped RM74 to RM2,706 per tonne, October 2010 lost RM82 to RM2,608 per tonne and November 2010 was RM174 lower to RM2,544 per tonne. Meanwhile, August 2010 contract expired on Monday with RM2,779 a tonne while new contract month, Dec 2010 stood at RM2,531 per tonne. Volume was higher at 113,927 lots compared with 99,077 lots last Friday while open interest stood at 67,893 contracts against 63,861 contracts at the end of last week. As for the cash market, August South dropped RM85 to RM2,735 per tonne compared from last Friday’s RM2,820 per tonne. – Bernama

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