Crude palm oil futures on Malaysia’s derivatives exchange ended mostly lower Thursday, with investors liquidating positions due to concerns that the strengthening ringgit would hurt palm refining margins.
The benchmark November contract on the Bursa Malaysia Derivatives exchange ended MYR15 lower at MYR2,595 a metric ton after tumbling to MYR2,567/ton, the lowest level for the benchmark contract since Aug. 3.
But prices came off their lows later in the day, on a likely rise in exports for the first 20 days of August.
Traders estimate Aug. 1-20 palm shipments have probably risen to 890,000-899,000 tons. Surveyors Intertek Agri Services and SGS (Malaysia) Bhd. estimated July 1-20 palm exports at 879,018 tons and 870,604 tons, respectively.
"China isn't buying palm oil actively, and this kept prices in check," said an executive at a global trading company.
Edible oils at Chinese ports were still on the high side, and "vegetable oil imports won't rise significantly more due to cheap domestic oils," the executive said.
The ringgit rose to its highest level since Oct. 15, 1997 after Malaysia's central bank eased foreign exchange rules by allowing companies to use the currency for international trade settlements.
As part of the currency liberalization from the central bank, China started trading the ringgit against the yuan.
Many trade participants were divided over whether demand for palm will rise following the currency's move, but a stronger ringgit "increases the capability for Malaysia's palm sector to attract labor and save on fertilizer costs," said an analyst at a Kuala Lumpur-based investment bank.
"It is still early to tell if demand for Malaysian palm oil will be affected due to the stronger ringgit. CPO will be driven by the currency strength for now, but that should normalize in the longer term," said a senior trading head at a Malaysia-based plantation company.
In the cash market, many trades were reported, with palm olein for October traded at $900/ton and January/February/March shipment at $861.50/ton and $860/ton, free-on-board Malaysian ports, said a Singapore-based physical market broker.
CME Group Inc.'s dollar-based November CPO futures were trading at $826.25/ton at 0928 GMT, up $5 from Wednesday's close.
Rupiah-denominated October CPO futures on the Indonesia Commodity and Derivative Exchange were 0.9% lower at IDR7,535 a kilogram at 0927 GMT.
Open interest on the BMD was 68,777 lots, versus 65,245 lots Wednesday. One lot is equivalent to 25 tons.
A total of 20,611 lots of CPO were traded versus 28,150 lots Wednesday.
Closing BMD Crude Palm Oil (CPO) futures prices in MYR/ton at 1000 GMT: Month Close Previous Change High Low Sep'10 2,742 2,735 Up 07 2,742 2,700 Oct'10 2,647 2,650 Down 03 2,653 2,609 Nov'10 2,595 2,610 Down 15 2,604 2,567 Dec'10 2,583 2,602 Down 19 2,591 2,560
-By Shie-Lynn Lim, Dow Jones Newswires; +603 2026 1233; shie-lynn.lim@dowjones.com
(END) Dow Jones Newswires
August 19, 2010 06:55 ET (10:55 GMT)
Copyright (c) 2010 Dow Jones & Company, Inc.
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