VEGOILS-Palm hits 5-wk low on weak overseas markets; exports steady

Tue Feb 26, 2013 5:28am EST

* External markets pressure palm, but demand expected to
pick up -trader
    * Drop of 18 pct seen in Feb palm oil production -trader
    * Palm oil to rebound into 2,506-2,521 ringgit range
-technicals

 (Updates throughout)
    By Anuradha Raghu
    KUALA LUMPUR, Feb 26 (Reuters) - Malaysian palm oil futures
slipped on Tuesday to their lowest in more than five weeks, as
weak overseas vegetable oil markets kept investors on edge,
although upbeat export data and slowing production helped limit
losses. 
    China and U.S. soy markets, which are tracked by palm,
remained weak after suffering steep falls on Monday and as
better weather in the U.S. Midwest and South America improved
the prospects for supply.
    But stronger-than-expected exports in the first 25 days of
February, buoyed by increased shipments of Malaysian palm oil
products to Europe and India, kept prices from tumbling further.
  
    "The market is a little oversold at the current juncture
after a slew of negative news from pundits and analysts," said a
trader with a local commodities brokerage in Malaysia. 
    "The external market 'grains' are a major contributor to the
current low prices. We anticipate demand to pick up very soon,
and prices to recover once the selling pressure subside."
    The USDA outlook numbers, with projections of a record
soybean crop at 3.4 billion bushels, are bearish, he added.
"This certainly spells trouble for palm oil in the second
quarter of 2013."
    The benchmark May contract on the Bursa Malaysia
Derivatives Exchange had dipped to 2,411 ringgit per tonne, the
lowest since Jan. 21, before closing at 2,417 ringgit ($779), a
fall of 2.2 percent.  
    Total traded volume stood at 35,620 lots of 25 tonnes each,
higher than the average 25,000 lots.
    Technicals showed Malaysian palm oil is expected to rebound
into a range of 2,506 to 2,521 ringgit per tonne, as a
correction from the Feb. 20 high of 2,584 ringgit may have been
temporarily completed, said Reuters market analyst Wang Tao.
 
    Investors are pinning hopes on healthy exports alongside
seasonally slowing production to ease the current stockpile of
2.58 million tonnes in Malaysia, the world's No.2 producer. 
    "At the end of the month we might see an 18 percent drop in
production. And with this kind of exports, we will definitely
see a drawdown in the stocks," said a trader who deals with a
foreign commodities brokerage.
    Oil fell below $114 a barrel on Tuesday, hit by doubts over
demand growth as a potential political vacuum in Italy revived
concern over instability in the debt-plagued euro zone.   
  
    In competing vegetable oil markets, the U.S. soyoil for May
delivery fell 1.3 percent in late Asian trade. The
most-active September soybean oil contract on the
Dalian Commodity Exchange slipped 1.5 percent.
    
  Palm, soy and crude oil prices at 1019 GMT
                                                                                        
  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      MAR3    2388   -31.00    2380    2422     700
  MY PALM OIL      APR3    2405   -44.00    2398    2452    5112
  MY PALM OIL      MAY3    2417   -53.00    2411    2474   19638
  CHINA PALM OLEIN SEP3    6702  -110.00    6698    6828  734330
  CHINA SOYOIL     SEP3    8312  -130.00    8306    8448  820498
  CBOT SOY OIL     MAY3   49.80    -0.64   49.69   50.50    9534
  NYMEX CRUDE      APR3   92.40    -0.71   91.92   92.65   19779
                                                                                        
  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= 3.104 ringgit)    

 (Editing by Clarence Fernandez)