Crude palm oil futures on Malaysia's derivatives exchange slipped from a fresh two-month high on late profit-taking and a pullback in prices of crude and soyoil futures in Asian trade.
The benchmark October contract on the Bursa Malaysia Derivatives exchange ended MYR21 or 0.8% lower at MYR2,498 a metric ton after moving in a MYR2,491-MYR2,535 range.
CPO was underpinned by concerns that the brewing La Nina episode, which brings heavier-than-expected rainfall, could prolong weak palm yields even as the crop enters a high production cycle in the second half of the year.
The physical market for palm also rose the past few days on firm demand, with buyers stepping up purchases on supply concerns for the nearby month, said a Singapore-based broker.
Traders said CPO output for the first 20 days of July probably grew only 1.5% from the same period last month, in contrast to a previous forecast of 5%-10% for overall July production, indicating a possible drawdown in palm inventory levels even as export demand rises ahead of the festive season beginning next month.
Still, the bullish factors had already been factored in Thursday's rally, making it tough to boost prices any higher, trade participants said.
Though investors are keen on CPO, profit-taking "is expected after the sharp rise in prices," said a trading executive in Malaysia. In early trade, palm prices rose as much as 0.6% to a fresh two-month high of MYR2,535/ton.
Weakness in crude and soyoil futures, with the weak buying momentum, also prompted traders to liquidate positions.
September crude oil on the New York Mercantile Exchange was trading 36 cents lower at $78.94 a barrel at 1010 GMT.
"The drop in prices is temporary, as weekly technical indicators has improved and showed that the market is very bullish. Prices are likely to move higher next week and may try to rise to MYR2,550/ton," said a senior trading executive at a Kuala Lumpur-based brokerage.
In the cash market, palm olein for August shipment was traded $827.50/ton, September at $820/ton, October/November/December at $805/ton, $812.50/ton and $815/ton, free on board Malaysian ports.
Cash CPO for prompt delivery was offered MYR10 lower at MYR2,570/ton.
CME Group Inc.'s dollar-based CPO futures weren't traded during Asian hours.
Rupiah-denominated October CPO futures on the Indonesia Commodity and Derivative Exchange were trading 0.5% lower at IDR6,755 a kilogram at 1028 GMT.
Open interest on the BMD was 68,218 lots, versus 68,575 lots Thursday. One lot is equivalent to 25 tons.
A total of 16,262 lots of CPO were traded versus 26,561 lots Thursday.
Closing BMD Crude Palm Oil (CPO) futures prices in MYR/ton at 1000 GMT: Month Close Previous Change High Low Aug'10 2,555 2,580 Down 25 2,589 2,551 Sep'10 2,510 2,533 Down 23 2,562 2,506 Oct'10 2,498 2,519 Down 21 2,535 2,491 Nov'10 2,499 2,517 Down 18 2,538 2,493
-By Shie-Lynn Lim, Dow Jones Newswires; +603 2026 1233; shie-lynn.lim@dowjones.com
(END) Dow Jones Newswires
July 23, 2010 06:42 ET (10:42 GMT)
Copyright (c) 2010 Dow Jones & Company, Inc.
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