CPO futures likely to trade in bearish mode, all eyes on India

KUALA LUMPUR: The crude palm oil (CPO) futures contract on Bursa Malaysia Derivatives is expected to trade in bearish mode next week amid talks that the Indian government is set to impose additional tariffs on imports of edible oil.

Singapore-based Palm Oil Analytics’ owner and co-founder Dr Sathia Varqa said India would table its 2021 budget on Monday (Feb 1).

"Should it (the hike) happen, local CPO futures on Bursa Malaysia will fall.

"So we are looking at a bearish week ahead, further weighed down by lower January exports,” he told Bernama.

Sathia projected exports to dip 20 to 30 per cent in January 2021.

Amspec recently estimated CPO exports would decline 35.06 per cent month-on-month (m-o-m) to 872,707 tonnes during the Jan 1 - 25 period, from 1.34 million tonnes in the same period of the preceding month, while ITS data showed exports declining 36.13 per cent m-o-m to 851,730 tonnes compared to 1.33 million tonnes previously.

On the other hand, palm oil trader David Ng said the marginal growth output projected for 2021 may help prices to remain stable.

Malaysian CPO production will likely increase only by 200,000 tonnes to 19.6 million tonnes this year from 19.4 million in 2020.

"We locate support at RM3,350 and resistance at RM3,500,” he said.

Meanwhile, Interband Group of Companies senior palm oil trader Jim Teh said prices would likely hover between RM3,250 and RM3,350 per tonne in the coming week.

"We are happy with the current pricing. The higher CPO prices of above RM3,000 is a boon for planters. With production cost of between RM1,500 and RM1,800 per tonne, it is almost 100 per cent profit,” he added.

For the week just ended, the CPO price was mostly higher on strong demand in sync with the performance of soyoil on the Dalian Commodity Exchange and Chicago Board of Trade, as a higher soybean oil price makes CPO more competitive in the export market.

On a weekly basis, the CPO futures contract for February 2021 surged RM352 to RM3,935 per tonne, March 2021 leapt RM259 to RM3,679 per tonne, April 2021 jumped RM208 to RM3,490 per tonne, and May 2021 was RM167 stronger at RM3,365 per tonne.

Weekly volume, however, shrank to 293,917 lots from 391,143 lots in the previous week, while open interest rose 265,549 contracts from 245,194 contracts a week earlier.

The physical CPO price for January South climbed RM300 to RM3,930 per tonne. - Bernama

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