BMD Crude Palm Oil Futures Market Closing Report

FCPO Closed Higher; Off Lows On Short Covering
Crude palm oil futures on Malaysia’s derivatives exchange fell below MYR2,400 a metric ton due to selling pressure related to concerns over China's tightening monetary policy, but came off lows in a bout of short covering.
Prices turned choppy during the afternoon session, moving between positive and negative territory but ending higher.

The benchmark April CPO contract on the Bursa Malaysia Derivatives ended MYR22 higher at MYR2,429/ton after moving in a range between MYR2,393-MYR2,438/ton.

"Gains on BMD were more of a technically-inspired rally. Global vegetable oil supply fundamentals remain bearish on prospects for a record South American soybean crop," a Kuala Lumpur-based trading executive said.

Investors were also concerned about China's future monetary policy measures, which have also affected most other commodity markets.

This year's soybean supply may be the key driver of prices in 2010, Barclays Capital said in a note.

With prospects for a large increase in global supply in the offing, prices of soybean and soybean products including soyoil may edge lover in the coming months. Brazilian and Argentine output will be flowing into markets in the first and second quarter this year, it said.

The soyoil price outlook influences palm oil prices as the vegetable oils compete for similar export markets.

During Asian trading hours, March soyoil on the Chicago Board of Trade fell as much as 30 points to 36.47 cents/pound. The March contract was last trading down 13 points from the overnight close at 36.64 cents/pound, down 13 points from the overnight close.

Palm oil's current supply fundamentals helped negate bearish cues from external markets and prevent a sharp decline in prices, due to a double-digit percentage decline in output in Jan. 1-25 from a month earlier, some traders said.