VEGOILS-Palm oil falls to 3-week low on prospects of record stocks

Mon Dec 3, 2012 6:19am EST

Related Topics

* Palm oil prices post biggest fall since Nov. 12
    * Investors use high stocks to book profits -trader
    * Global commodity markets rise on stronger China factory
data
    * Palm oil to end rebound around 2,422 ringgit -technicals

 (Updates prices, adds detail)
    By Anuradha Raghu
    KUALA LUMPUR, Dec 3 (Reuters) - Malaysian palm oil futures
tumbled to a three-week low on Monday as investors booked
profits on expectations of record stocks last month and after
strong Chinese economic data lifted markets.
    Palm oil prices initially inched higher in early trading
hours buoyed by signs of China's economic revival which fuelled
hopes of stronger commodity demand. Later on in the day, the
market posted its biggest fall since Nov. 12 as traders unwound
positions.
    "This is a headache, the market is dropping quite a bit.
Investors are using the high stocks level to book profits," said
a trader with a foreign brokerage, estimating stocks could go
beyond the record 2.5 million tonnes notched in October.
   "In reality, palm oil is at a $350 per tonne discount to
soyoil and that should kick in some demand (and lift the
markets)," he added.
    Palm oil futures are set to post their worst annual
performance this year since the financial crisis struck in 2008
as high stocks, flagging demand and deepening euro zone debt
crisis curbed risk taking. 
    The benchmark February contract on the Bursa
Malaysia Derivatives Exchange fell as much as 2.4 percent to
2,313 ringgit ($760) per tonne before settling at 2,317 ringgit.
    Total traded volumes stood at 30,926 lots of 25 tonnes each,
higher than the usual 25,000 lots as investors actively booked
profits.
    Palm oil is expected to end its current rebound, based on a
presumption that the fall from the Nov. 20 high of 2,485 ringgit
has not been completed, said Reuters market analyst Wang Tao.
 
    Traders said investors were trying to bring the market down
to 2,300 ringgit, after which there was likely to be rebound. 
    Other global financial markets were still up on a clutch of
factory surveys on China showing evidence of an economic revival
after seven quarters of slowing growth that signals stronger
commodity demand from the world's second largest
economy.  
    China's encouraging revival supported Brent crude, which
held around $111 per barrel on Monday, although gains were
limited by concern about the economic welfare of the United
States, the world's top oil consumer. 
    Stronger buying from Europe and India lifted Malaysian palm
oil exports in November compared to a month ago, according to
data from cargo surveyors.  
    Based on this, some traders are holding out for signs of
higher demand, coupled with seasonally weaker palm oil output in
Malaysia that could limit the growth of this Southeast Asian
country's stocks. 
    Production tends to slow down in the year-end as heavy rains
can trigger floods that disrupt harvesting and complicate
logistics. 
    "Previously we were talking about Dec-Jan stocks hitting 3
million tonnes, but I don't think that will materialize," said
another trader. "Instead of going up, stocks could drop down by
at least 50,000 tonnes because of demand from Europe and China".
  
    In palm oil's competing markets, U.S. soyoil for December
delivery rose 0.8 percent. The most active May 2013
soybean oil contract on the Dalian Commodity Exchange
climbed 1.4 percent in late Asian trade.
    In a sign of festival demand, Chinese soy buyers have
stepped up orders from the United States in recent days, keen to
purchase cargoes for delivery in the first quarter of next year,
traders said last week. 
    China celebrates a one-week Lunar New Year holiday in
February.    
    
  Palm, soy and crude oil prices at 1020 GMT
                                                                                                 
  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      DEC2    2101   -44.00    2100    2139     235
  MY PALM OIL      JAN3    2240   -62.00    2236    2338    3605
  MY PALM OIL      FEB3    2317   -53.00    2314    2405   17627
  CHINA PALM OLEIN MAY3    6840  +132.00    6746    6880  528054
  CHINA SOYOIL     MAY3    8684  +118.00    8600    8700  548740
  CBOT SOY OIL     JAN3   50.15    +0.41   49.73   50.55   10626
  NYMEX CRUDE      JAN3   88.85    -0.06   88.66   89.30   17032
                                                                                                 
  Palm oil prices in Malaysian ringgit per tonne
  CBOT soy oil in U.S. cents per pound
  Dalian soy oil and RBD palm olein in Chinese yuan per tonne
  Crude in U.S. dollars per barrel
 
($1=3.043 ringgit)

 (Editing by Niluksi Koswanage)
FILED UNDER: