VEGOILS-Palm eases to 6-week low; output seen rising

Tue Jul 2, 2013 6:42am EDT

* Malaysia's June palm exports up 5-7 pct -cargo surveyors
    * Production moving into peak season from July -trader
    * Prices fell to an intraday low of 2,324 ringgit, the
lowest since May 21

 (Updates throughout)
    By Anuradha Raghu
    KUALA LUMPUR, July 2 (Reuters) - Malaysian palm oil futures
fell to a six-week low on Tuesday as concerns over rising
production in the second half of the year offset expectations
that stocks in the world's No.2 producer could ease in June.
    A demand uptick ahead of the Muslim Ramadan festival had
helped boost palm oil exports by 5-7 percent for June as buyers
such as India, Pakistan and the Middle East stocked up on the
tropical oil.  
    Market participants are awaiting data due next week from
industry regulator Malaysian Palm Oil Board (MPOB) on June's
stockpiles and production levels. Analysts and traders expect
end-stocks to ease further from the current 1.82 million tonnes.
    "Investors are waiting for the MPOB data. Stocks in June
could draw down about 100,000 tonnes to 1.68-1.72 million
tonnes," said a Kuala Lumpur-based trader with a foreign
commodities brokerage.
    But concerns remained that robust exports might not hold for
long. Demand could dwindle on volatile economic conditions in
the world's top two consumers, China and India, while tropical
palm moves into a season of rising output in the second half of
2013.
    "Palm oil looks bearish in the long term because production
is starting to move into its peak season from July onwards.
Maybe in the first week of July there could be good exports, but
it should taper off after Ramadan," the Kuala Lumpur trader
added.
    The benchmark September contract on the Bursa
Malaysia Derivatives Exchange edged 0.2 percent lower to close
at 2,339 ringgit ($738) per tonne. Prices earlier fell to an
intraday low at 2,324 ringgit, the lowest since May 21. 
    Total traded volumes stood at 35,891 lots of 25 tonnes each,
in line with the average 35,000 lots.    
    The recent haze that choked Malaysia and Singapore has put
planters under scrutiny and raised calls to cut reliance on
unsustainable palm oil, which could add pressure on prices.
    Food manufacturers have been urged to replace the tropical
oil, an ingredient used in biscuits, chocolate and ice-cream,
with other edible oils such as sunflower, corn and canola,
Phillips Futures said in a note on Tuesday. 
    "We would not expect a significant dip in palm oil demand
brought about by this initiative. However, if the substitution
of palm oil were to take place over a transitional phase, we
could expect future demand for palm oil to be adversely
affected," the Singapore-based broker said.   
    CME Group cleared the first trade of its newly
launched palm oil swaps <0#4CPC:> on June 21, done between
Gunvor Group and Louis Dreyfus Commodities, the exchange said on
Tuesday. It added that open interest for the swaps have crossed
the 1,000-lot mark since the launch on June 3. 
    In other markets, Brent oil rose above $103 a barrel on
Tuesday, up for a second day due to concerns about supply
disruptions in the Middle East and Africa and a slightly
improved economic outlook.     
    In vegetable oil markets, U.S. soyoil for December 
was flat in late Asian trade. The most-active January soybean
oil contract on the Dalian Commodities Exchange ended
almost unchanged.     
  Palm, soy and crude oil prices at 1006 GMT
                                                                      
  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      JUL3    2334    -3.00    2334    2365      90
  MY PALM OIL      AUG3    2341    -5.00    2328    2364    3349
  MY PALM OIL      SEP3    2339    -4.00    2324    2362   18865
  CHINA PALM OLEIN JAN4    5898    +4.00    5862    5930  348176
  CHINA SOYOIL     JAN4    7360    +2.00    7324    7430  776510
  CBOT SOY OIL     DEC3   45.68    +0.00   45.60   45.96    6697
  NYMEX CRUDE      AUG3   98.16    +0.17   97.78   98.36   21329
                                                                      
  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=3.17 ringgit)

 (Additional reporting by Chew Yee Kiat; Editing by Muralikumar
Anantharaman and Anupama Dwivedi)