Crude palm oil futures on Malaysia’s derivatives exchange fell as much as 0.9% to a fresh 5-month low Thursday due to bearish supply news and weak crude oil.
Export numbers for the June 1-10 period rose, but probably not enough to offset rising production, trade participants said.
The benchmark August contract on the Bursa Malaysia Derivatives exchange ended MYR8 lower at MYR2,410 a metric ton, off the low of MYR2,396/ton.
Light, sweet crude for July delivery on the New York Mercantile Exchange fell as much as 0.9% in Asia to $73.72/bbl. The July contract was last trading 37 cents higher at $74.75/bbl at 1040 GMT.
CPO futures traded lower following key production and stock data from the Malaysian Palm Oil Board as "end-May stock draw-down wasn't significant enough and many fear that stocks may rise further in June as output is on an uptrend," a Malaysia-based senior trading executive said.
The MPOB estimated that palm oil production in May rose 6% from the previous month to 1.39 million metric tons, within market expectations 1.37 million-1.40 million tons.
Inventories were down 3.7% at 1.56 million tons while exports rose 6% at 1.36 million tons.
Trade participants also feared that euro-zone debt problems could translate into slowing demand for palm oil in the medium term, and the commodity is still at a disadvantage to soyoil in terms of price competitiveness in the global vegetable oils trade.
Cargo surveyor Intertek Agri Services estimated Malaysia's palm oil exports during the June 1-10 period up 23% from the first 10 days of May to 435,148 tons. Another surveyor, SGS (Malaysia) Bhd., estimated exports in the period at 423,199 tons.
Meanwhile, many trade participants took a neutral view of the five-year national development plan the Malaysian government unveiled Thursday. Under the 10th Malaysia Plan, the government aims to boost the palm oil sector's contribution to Malaysia's gross domestic product to MYR21.9 billion by 2015 from MRY17 billion in 2009. It also plans to boost palm export earnings to MRY69.3 billion from MYR49.6 billion in 2009 via measures to boost investment in downstream sectors including biofuels, oleochemicals, biomass and pharmaceuticals.
A Malaysia-based analyst said the plans for palm oil sector "are hardly exciting and to drive growth via downstream business seems difficult as the value-added is small compared to upstream (businesses)."
"Frankly, Indonesia would be a more attractive destination for palm oil investments, be it for upstream or downstream," a senior trading executive from Kuala Lumpur said.
In the cash market, palm olein for July was traded at $780/ton, and October/November/December at $745/ton and $750/ton, free-on-board Malaysian ports, a Singapore-based cash market broker said.
Cash CPO for prompt delivery was offered MYR15 lower at MYR2,535/ton.
CME's Group Inc.'s (CME) dollar-based CPO futures for September were trading $4.00 lower at $718.25/ton at 0941 GMT. One lot is equivalent to 25 tons.
August rupiah-denominated CPO futures on the Indonesia Commodity and Derivative Exchange ended 0.2% lower at IDR6,515 a kilogram with 74 lots traded. One lot is equivalent to 10 tons. The September contract also ended marginally lower at IDR6,420/kg with 137 lots done.
Open interest on the BMD was 76,929 lots, versus 73,231 lots Wednesday. One lot is equivalent to 25 tons.
A total of 8,641 lots of CPO were traded versus 25,460 lots Wednesday.
Closing BMD Crude Palm Oil (CPO) futures prices in MYR/ton at 1000 GMT: Month Close Previous Change High Low Jun'10 2,525 2,524 Up 01 2,535 2,521 Jul'10 2,450 2,454 Down 04 2,470 2,440 Aug'10 2,410 2,418 Down 08 2,426 2,396 Sep'10 2,385 2,395 Down 10 2,402 2,372
-By Shie-Lynn Lim, Dow Jones Newswires; +603 2026 1233; shie-lynn.lim@dowjones.com
(END) Dow Jones Newswires
June 10, 2010 07:01 ET (11:01 GMT)
Copyright (c) 2010 Dow Jones & Company, Inc.
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