Crude palm oil futures on Malaysia’s derivatives exchange erased losses Tuesday on intraday short-covering amid weather uncertainties for the palm crop and tight nearby supplies, trade participants said.
The benchmark October contract on the Bursa Malaysia Derivatives exchange ended MYR12 higher at MYR2,485 a metric ton after tumbling close to a week's low at MYR2,434/ton.
Preliminary data from an industry body Thursday showed output for the first 25 days of July had risen only 1.3% from the same period last month, which may lead to a drawdown in palm inventory levels as demand is likely to outpace supply.
Some among trade participants said July production could probably decline from last month's level at 1.39 million tons, as erratic weather conditions probably lowered yields at key palm growing regions including Sabah, even as palm trees go into high production season.
"July's palm production has been below expectations. The single-digit gain (during the higher production cycle) is a far cry from the previous year's performance," said the trading head at a Malaysia-based major plantation company.
Traders said any decline in palm production could boost prices to MYR2,500-MYR2,600/ton in the next few trading sessions.
For the most part of the day prices remained in negative territory as the ringgit gained traction.
The dollar fell to MYR3.1900 versus Monday's level of MYR3.1950. A stronger ringgit make CPO more expensive as a feedstock, affecting palm refining margins.
In the cash market, palm olein for October/November/December was traded at $795/ton free on board Malaysian ports, a Singapore-based trading executive said.
Cash CPO for prompt delivery was offered MYR10 higher at MYR2,560/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 1.5% lower at IDR6,710 a kilogram at 0932 GMT.
Open interest on the BMD was 68,489 lots, versus 68,489 lots Monday. One lot is equivalent to 25 tons.
A total of 17,747 lots of CPO were traded versus 18,236 lots Monday.
Closing BMD Crude Palm Oil (CPO) futures prices in MYR/ton at 1000 GMT: Month Close Previous Change High Low Aug'10 2,555 2,550 Up 05 2,555 2,515 Sep'10 2,505 2,491 Up 14 2,505 2,458 Oct'10 2,485 2,473 Up 12 2,485 2,434 Nov'10 2,478 2,470 Up 08 2,478 2,429
-By Shie-Lynn Lim, Dow Jones Newswires; +603 2026 1233; shie-lynn.lim@dowjones.com
(END) Dow Jones Newswires
July 27, 2010 06:55 ET (10:55 GMT)
Copyright (c) 2010 Dow Jones & Company, Inc.
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