Palm Oil Declines on Volatility Fears
Singapore. Palm oil futures in Malaysia fell a fourth day on speculation that prices may be volatile over the next few years as fertilizer costs affect planters.
“Fertilizer prices could be the next major indirect determinant of crude palm oil prices,” said Hoe Lee Leng of RHB Research Institute in a report on Friday. Palm oil may experience “significant price volatilities ahead for the next few years,” the plantation analyst wrote.
There is also concern that demand in India, the second largest user after China, may slow if the country’s government imposes import taxes on palm oil. Indian cooking oil imports surged 82 percent in the six months to April 30 after the government lifted import taxes amid a decline in local oilseed output.
August-delivery palm oil on the Malaysia Derivatives Exchange dropped 0.7 percent to 2,552 ringgit ($730) a metric ton as of 5:01 p.m. in Kuala Lumpur. Futures gained as much as 1.6 percent earlier on speculation rising oil prices would boost demand for palm oil as biofuel, putting pressure on dwindling stockpiles. The contract has lost 0.3 percent this week.
The cost of fertilizer may stay “high in the long term, thus making it more expensive for plantation companies to upkeep estates,” Hoe wrote in the report. With Malaysian planters importing up to 40 percent of their fertilizers in the form of potash, “planters need to reduce application or look for alternatives,” he said.
Palm oil had been tracking oil prices higher this week. Crude oil surged 4.1 percent in New York yesterday to $68.81 a barrel and advanced another 0.4 percent in Asia trading to $69.11 a barrel at 5:03 p.m. in Singapore.
“We remain positive about crude palm oil prices until the end of the second quarter, as the replenishment of stocks will require time,” said Ivy Ng, a plantation analyst at CIMB Investment Bank, in a report on Friday.
CIMB raised its 2009 palm oil price target by 18 percent to $710 a metric ton on Friday. The commodity has averaged $604 this year, according to Bloomberg data.
Malaysia’s palm oil stockpiles in April shrank to 1.29 million tons, the lowest since June 2007 and 43 percent lower than November’s record of 2.27 million tons, according to data from the country’s Palm Oil Board.
Reserves in Indonesia, the top producer, have fallen to less than 1 million tons, Palm Oil Board deputy chairman Derom Bangun said on May 29, without giving comparative figures.
“We are favoring crude oil at the moment,” said Sean Darby, chief Asia and emerging markets strategist for Nomura International Hong Kong, in a television interview on Friday. “The best of the supply-demand imbalance is really with the soft commodities,” including palm oil, he added.
Palm oil rallied 50 percent this year on concern that the supply of soybeans, crushed to make rival soybean oil, may drop in Argentina due to drought, and as US stockpiles are forecast to reach a five-year low.
In China, the biggest user, palm oil for September delivery on the Dalian Commodity Exchange gained as much as 2.7 percent to 6,936 yuan ($1,015) a ton. The commodity, which climbed above 7,000 yuan this week for the first time since May 13, closed 1.9 percent higher at 6,882 yuan.
Bloomberg
“Fertilizer prices could be the next major indirect determinant of crude palm oil prices,” said Hoe Lee Leng of RHB Research Institute in a report on Friday. Palm oil may experience “significant price volatilities ahead for the next few years,” the plantation analyst wrote.
There is also concern that demand in India, the second largest user after China, may slow if the country’s government imposes import taxes on palm oil. Indian cooking oil imports surged 82 percent in the six months to April 30 after the government lifted import taxes amid a decline in local oilseed output.
August-delivery palm oil on the Malaysia Derivatives Exchange dropped 0.7 percent to 2,552 ringgit ($730) a metric ton as of 5:01 p.m. in Kuala Lumpur. Futures gained as much as 1.6 percent earlier on speculation rising oil prices would boost demand for palm oil as biofuel, putting pressure on dwindling stockpiles. The contract has lost 0.3 percent this week.
The cost of fertilizer may stay “high in the long term, thus making it more expensive for plantation companies to upkeep estates,” Hoe wrote in the report. With Malaysian planters importing up to 40 percent of their fertilizers in the form of potash, “planters need to reduce application or look for alternatives,” he said.
Palm oil had been tracking oil prices higher this week. Crude oil surged 4.1 percent in New York yesterday to $68.81 a barrel and advanced another 0.4 percent in Asia trading to $69.11 a barrel at 5:03 p.m. in Singapore.
“We remain positive about crude palm oil prices until the end of the second quarter, as the replenishment of stocks will require time,” said Ivy Ng, a plantation analyst at CIMB Investment Bank, in a report on Friday.
CIMB raised its 2009 palm oil price target by 18 percent to $710 a metric ton on Friday. The commodity has averaged $604 this year, according to Bloomberg data.
Malaysia’s palm oil stockpiles in April shrank to 1.29 million tons, the lowest since June 2007 and 43 percent lower than November’s record of 2.27 million tons, according to data from the country’s Palm Oil Board.
Reserves in Indonesia, the top producer, have fallen to less than 1 million tons, Palm Oil Board deputy chairman Derom Bangun said on May 29, without giving comparative figures.
“We are favoring crude oil at the moment,” said Sean Darby, chief Asia and emerging markets strategist for Nomura International Hong Kong, in a television interview on Friday. “The best of the supply-demand imbalance is really with the soft commodities,” including palm oil, he added.
Palm oil rallied 50 percent this year on concern that the supply of soybeans, crushed to make rival soybean oil, may drop in Argentina due to drought, and as US stockpiles are forecast to reach a five-year low.
In China, the biggest user, palm oil for September delivery on the Dalian Commodity Exchange gained as much as 2.7 percent to 6,936 yuan ($1,015) a ton. The commodity, which climbed above 7,000 yuan this week for the first time since May 13, closed 1.9 percent higher at 6,882 yuan.
Bloomberg