Growing stocks to pressure CPO prices

Crude palm oil (CPO) futures on Bursa Malaysia Derivatives are expected to trade in ranges next week amid concerns over growing stockpiles this month, dealers said.

"The stock level is very high and the output is expected to grow by about 5-10 per cent this year. This would put pressure on prices," one of the dealers said.

Inventory has increased to 2.239 million tonnes in December 2009 -- the second highest on record. The highest was 2.266 million tonnes in November 2008.

"A key factor for the rise in stockpile was the sharp decline in shipment, suggesting that prices have reached levels high enough to douse demand, bearing in mind that December's average price was RM2,456 per tonne, which was more than RM100 per tonne lower than the current level.

"Unless prices ease sufficiently, the inventory level may keep rising, given the normalisation in both Malaysia and Indonesia after last year's poor crop," he said.

CPO prices could move downward during the high production season, the dealer said, adding that prices were expected to hover around RM2,200 and RM2,300 per tonne next week after being traded above RM2,400 per tonne throughout the week.

The local CPO market would also track closely other vegetable markets as well as crude oil prices for direction, he said.

On a Friday-to-Friday basis, the CPO futures contract for January 2010 dropped RM90 to RM2,480 per tonne while February 2010 went down RM125 to RM2,467 per tonne. March 2010 lost RM136 to RM2,490 per tonne and April 2010 dived RM141 to RM2,495 per tonne.

The week's turnover broadened to 111,844 lots compared with last week''s 71,052 lots.
Open position, however, fell to 75,701 contracts on Friday from 80,208 contracts at the end of last week.
On the physical market, January South traded lower at RM2,490 per tonne compared to RM2,590 per tonne previously.