Crude Palm Oil Ends Up In Technical Trade; Output Concerns

Crude palm oil futures on Malaysia’s derivatives exchange rose Thursday in a technical rebound after falling in the previous session, driven by a likely decline in April’s palm oil output, trade participants said.

The benchmark July contract on the Bursa Malaysia Derivatives exchange ended MYR19 higher at MYR2,490 a metric ton after moving in a MYR2,467-MYR2,497 range.

The July contract is expected to be tad choppy Friday and could see a bout of short covering, trade participants said.

"CPO futures may attempt to rise further but prices need to cross the great wall of resistance at MYR2,500/ton," said a senior executive at foreign trading house.

Trading executives said Malaysia's CPO output in April may be a tad lower than in March due to the gradually declining palm oil extraction rates and delayed impact from last year's El Nino induced dry spell.

"Preliminary estimates show production at a few major plantation companies in Malaysia declined between 2% and 10%," a Malaysia-based vegetable oils exporter said.

Executives at palm plantation companies with estates in the northern states of peninsular Malaysia said oil extraction rates had declined by around 1% from around 20% since mid-March due to a biological down cycle that may continue in April.

While the decline is marginal, a persistent fall in these rates may lead to a fall in annual production for 2010, analysts said.

In other news, India's edible oils industry has proposed its federal government impose a 10% import duty on CPO and raise the duty on refined, bleached and deodorized palm olein to 17.5% to control imports and encourage domestic oilseed crushing.

"Even though this is merely a proposal by the Solvent Extractors' (Association of India), CPO prices may advance tomorrow due to the lack of fresh leads. Anything can drive the market," said a senior trading executive in Kuala Lumpur.

India, the world's second-largest vegetable oil importer, currently doesn't impose any import tax on crude edible oils but levies a 7.5% tax on refined edible oils.

It imports most of its palm oil needs from Indonesia and Malaysia, with CPO and RBD palm olein accounting for more than 70% of its total edible oil imports.

Total edible oil imports during the November-March period rose about 6% to 3.6 million tons. The country imported a record 8.18 million tons of edible oil in the 2008-09 marketing year.

In the cash market, palm olein for May shipment was traded at $797.50/ton, free on board Malaysian ports, a Singapore-based broker said.

Cash CPO for prompt shipment was offered MYR20 higher at MYR2,520/ton.

Open interest on the BMD was 66,281 lots, versus 67,525 lots Wednesday. One lot is equivalent to 25 tons.

A total of 11,918 lots of CPO were traded versus 11,971 lots Wednesday.

Closing BMD Crude Palm Oil (CPO) futures prices in MYR/ton at 1000 GMT: 

Month   Close   Previous  Change   High    Low
May'10  2,515     2,496   Up  19   2,518   2,494
Jun'10  2,501     2,483   Up  18   2,505   2,478
Jul'10  2,490     2,471   Up  19   2,497   2,467
Aug'10  2,488     2,470   Up  18   2,492   2,466