Malaysia palm oil futures off highs due to profit-taking

Malaysia palm oil futures off highs due to profit-taking

KUALA LUMPUR (Reuters): Profit-taking hit Malaysia's palm oil futures at the close on Friday after players concluded the country's plan to cut stocks and raise prices will only benefit rival vegetable oils producers.

"People took profit after learning the outlook is not as bright as they have thought. Exports may be good in March, but we don't know what will happen in April/May when soyoil starts entering the market," said one trader in Kuala Lumpur.

Some traders expected Malaysia's palm oil exports to reach up to one million tons in March because of declines in soybean oil supply, which forced buyers to turn to palm oil.

Brazil is harvesting soybean while Argentine is expected to start next month. Fresh soyoil supply from South America could start to flood the global market in April/May/June and curb Malaysia's exports, said traders.

Primary Industries Minister Lim Keng Yaik said the country's largest power firm, Tenaga Nasional Bhd, had started burning crude palm oil (CPO) in the last few days as part of a project to ease stocks in the world's largest producer.

At the close, benchmark third-month June futures was unchanged at 880 ringgit ($231.57) a ton after trading as high as 899 ringgit. Volume was 2,766 lots.

Traders said Indonesia, the world's number two producer of palm oil, will offer discounts to grab market share, while Brazil and Argentina, exporters of competing soybean oil, will target the Indian market where import duties favor soybeanoil over palm oil.

Traders said Indonesia had sold CPO at $207/ton FOB Belawan for April shipments while Malaysia's crude palm oil was much higher at $223/ton.

Physical April (south and central) was offered at 870 ringgit a ton against bids of 860. Trade was reported at 865 to 870 for both regions.

May (south and central) was offered at 880 ringgit and bid at 870, and trade was reported at 880 to 885 for both regions.