Low Malaysian output talk fuels palm oil by 4 per cent

Crude palm oil (CPO) futures surged 4 per cent on the Multi-Commodity Exchange (MCX) on Thursday, taking cues from overseas markets where investors are betting big on a steep fall in Malaysian inventory.

The contract for delivery in June rose 3.99 per cent to Rs 347 per 10 kg in early evening trade, while the May contract gained 3.04 per cent to Rs 342. The near-month contract also jumped 2.31 per cent at Rs 337.30. On the MCX, CPO for near-month delivery has jumped 23.37 per cent this year.

In the spot Kandla market, CPO jumped 27 per cent to close on Thursday at Rs 338.30 from Rs 266.50 early this year.

According to a release from the National Commodity & Derivatives Exchange (Ncdex), CPO for delivery in April, May and June remained unchanged at Rs 325.75, Rs 327.30 and Rs 328.85 respectively. The contracts remained un-traded on the country’s second-largest commodity exchange On Thursday.

According to a Reuters report, palm oil stocks in Malaysia have come down by 12.8 per cent to its 20-month low at 1.36 million tonnes in March. This has created a fear among traders that the supply of the largest selling vegetable oil may fall in anticipation of higher futures prices.

Elsewhere, Malaysian crude palm oil futures also gained 2.9 per cent to hit its 6-month high on renewed interest from investors. The commodity is also getting support from crude oil and soyoil market, which move in tandem with CPO. On the Bursa Malaysia Derivatives Exchange, the benchmark June contract rose 63 ringgit to 2,228 ringgit per tonne, the highest since September 29, 2008.

Palm oil futures in Malaysia have gained 28 per cent this year on rising shipments to China and India. Heavy rains and floods in Sabah and Sarawak, two states on the Borneo island in Malaysia which account for 40 per cent of the country’s total palm oil output, have hit supplies.

The concern over low-supply estimates was seen on the Chicago Board of Trade (CBoT) too, where soybean futures rose to a 2-month high with July soybean futures hitting the $10-a-bushel-mark in late Wednesday trade. “Investors took position ahead of a crucial US report which is expected to show a decline in soy stocks,” the analyst said.

The Malaysian Palm Oil Board (MPOB) is scheduled to release the crucial March palm oil stocks, production and exports data on April 10. However, analysts believe crude palm oil output may inch up 1.1 per cent to 1.2 million tonnes.

Crude oil rose to $50 on Thursday as the market focused on a large draw in US distillates inventories, stronger equity markets and a grim US economic outlook.

Meanwhile, China and India, the world’s two largest edible oil consumers, have enough vegetable oil reserves after buying heavily in the beginning of the year.