Crude Palm Oil Futures Outlook 12 Mar 2009

Cpo futures closed lower yesterday amid bearish export performance and lower soy e-trading. MPOB released its official numbers yesterday whereby exports in February declined 7.16% to 1.256,782 million tones compared with exports in January. Meanwhile, stocks fell 14.66% to 1..561 million from 1,829 million. Palm oil production recorded 1.186 million tons in February, down 10.7 percent compared with the previous month due to decline in production and flood in some plantation area.

At closed March09 lost RM15 to RM2075, April 2009 shed RM35 to RM2005, while the benchmark 3rd month May 2009 shed RM15 to RM1980. Turnover decreased to 12,770 lots from 13,187 lots yesterday while open interests went up to 88,765 contracts from 87,626 contracts.

Crude oil settle at $42.38 a barrel in NYMEX after falling 7.48% yesterday as a U.S... government report showed a bigger-than-expected inventory gain and a drop in fuel consumption to a two-month low. Supplies increased 749,000 barrels to 351.3 million barrels last week, the Energy Department said yesterday. Crude oil for April delivery shed $3.38 to $42.38 a barrel.

Soybean futures for May delivery fell 15 cents, or 1.7%, to $8.62 a bushel in CBOT. Demand for grain and oilseeds to feed livestock, poultry and dairy cows will fall as the global recession reduces consumer demand. World consumption of grain to feed animals, excluding rice and wheat, will fall 1.7% to 642.5 million metric tons in the marketing year that began Oct. 1, the USDA said. That would be the biggest percentage drop in 13 years, USDA data show.

ursa Malaysia will step up efforts to market making, having seen thin trade of the US dollar-denominated crude palm oil futures known as FUPO, since its launch six months ago. Bursa COO, Omar Merican admitted that Bursa Malaysia had underestimated the scale of the global crisis when FUPO was launched on 5 Sep 08. It only saw five lots traded on its first trading day.

Market Outlook

The cpo reversed early gains as the benchmark May fell 0.75%, off the day low to settle at RM1980. The big range and swing is a sign of the current uncertainty. As the candles maintain above the major SMA, it is only a matter of time before the cpo recover towards RM2000-2020 level. Support peg at RM1950-1920. Cpo futures likely to open lower in line with the weak soy and crude oil market overnight.

FCPO >>> BUY ON WEAKNESS