THE price of crude palm oil (CPO) traded RM50 to RM58 higher in the morning yesterday one of the highest gains in single-day trade this year triggering traders' hopes of a short-term bull run chasing prices to above RM1,500 a tonne.
Both Malaysia Derivatives Exchange (MDEX) and the spot-cash market, which was closed for two public holidays in midweek, saw prices surging strongly, taking their lead from the overnight Chicago Board of Trade, where prices firmed on India's move on Wednesday to cut the base import price of palm oil and crude soybean oil, which are used to calculate tariffs.
On MDEX yesterday, the benchmark third-month August futures opened RM58 higher at RM1,477 a tonne.
However, massive profit-taking in late trade pushed them back to RM1,433 at the close, RM14 above Tuesday's close.
Likewise, the physical CPO market closed higher at RM1,510 a tonne, up from RM1,485.
A CPO trader with a local trading house in Kuala Lumpur said: India's latest move is indeed another pleasant surprise for palm oil producing countries like Malaysia and Indonesia.
The cut in the base import price of selected edible oils indicates India's oil and fats supply cannot cope with the increasing demand from local consumers.
India was hit by severe drought last year, badly affecting the country's oilseeds production, he added. Prices rose as a result.
Traders said India's move to reduce import tariffs was mainly to bring down domestic cooking oil prices.
It reduced the tariff value on CPO by US$42 to US$390 (from US$432), on RBD palm oil by US$34 to US$426 (from US$460), on RBD palm olein by US$36 to US$434 (from US$470) and on crude palm olein by US$39 to US$415 (from US$454).
Late last month, India had slashed the customs duty on RBD palm oil and palm olein from 85% to 70%, as well as abolished the 4% special additional duty imposed on these items.
India had projected oils and fats production at 7.8 million tonnes between October 2002 and Sept 2003, the trader said.
He added: I seriously don't think it is achievable due to last year's severe drought.
Of the amount, butterfats was seen contributing 2.3 million tonnes, rapeseed oils 1.3 million tonnes, groundnut oil 900,000 tonnes and soybean oil 700,000 tonnes.
The trader also noted that India was reported to have imported about 430,000 tonnes of oils and fats in March one of the highest monthly quantities this year of which about 60% to 65% were palm oil imports from Malaysia and Indonesia.
Another CPO trader pointed out that based on current forward-month prices for CPO, India is expected to further increase its palm oil purchases over the next two to three months.
With rising demand for oils and fats, I strongly believe India will need to build up new stocks in the coming months, he added. India's oils and fats consumption for October 2002 to September 2003 has been estimated at 12.65 million tonnes.
Meanwhile, Intertek Testing Services, one of the market's two cargo surveyors, said last week that it had estimated Malaysian oil shipments for May 115 at 545,076 tonnes against 465,384 tonnes for April 115.
Dealers expect Societe Generale de Surveillance (SGS), another exports tracker watched closely by the market, to declare Malaysia's exports at between 520,000 and 565,000 tonnes for the first half of May when it releases its data next week.