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Thursday, January 28, 2010

BMD Crude Palm Oil Futures Market Overviews

Crude Palm Oil Ends Up; Likely Higher Exports, Lower Output
Crude palm oil futures on Malaysia’s derivatives exchange ended higher Thursday as investors covered shorts on a likely rise in exports in January.

Talk of lower output in Indonesia, the world’s largest CPO producer, and a fall in Malaysia’s palm oil production prevented prices from sliding below MYR2,400 a metric ton, said trade participants.

The benchmark April CPO contract on the Bursa Malaysia Derivatives ended MYR22 higher at MYR2,451/ton, close to an intraday high of MYR2,475/ton.

The contract opened lower on long liquidation but quickly moved into positive territory and further extended gains during the afternoon session.

"Speculators are expecting cargo surveyors to issue bullish export data. Prices are also up as some have squared-off positions ahead of the long weekend," said a Malaysia-based exporter.

Markets will be closed Monday for Federal Territory Day.

Cargo surveyors Intertek Agri Services and SGS (Malaysia) Bhd. are expected to issue export data for January Monday, despite the holiday.
If soyoil and crude oil futures are positive overnight, CPO prices could even test MYR2,500/ton Friday, said a Kuala Lumpur-based broker.

March soyoil was trading 29 points higher at 36.61 cents a pound by the end of trade on BMD.

Analysts said lower CPO output in the first six months of 2010 will likely reduce palm oil inventories in Malaysia. This may raise CPO prices as demand for the vegetable oil improves in tandem with the global economic recovery.

With Malaysia's replanting program covering 200,000 hectares of plantation land to be carried out in 2010, CPO output is expected to decline, said an analyst at BNP Paribas.

Lower output in January may prevent a buildup in palm oil inventories and improved exports may reduce stocks to around 2 million tons, said an analyst in Kuala Lumpur. Palm reserves were around 2.24 million tons in December.

In the cash market, palm olein for April/May/June traded at $752.50/ton, free-on-board Malaysian ports, said a Singapore-based trader.

Cash CPO for prompt delivery was offered MYR30 higher at MYR2,480/ton.
Open interest on the BMD was 73,347 lots, down from 73,799 lots traded Wednesday. One lot is equivalent to 25 tons. A total of 15,763 lots of CPO were traded versus 20,285 lots Wednesday.

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