THE soyoil and soybean rally on the Chicago Board of Trade (CBOT), which hit a 19- and 15-year high respectively following news of low soybean yield in South America and tight stocks in the United States, has strengthened the bullish sentiment on crude palm oil (CPO) prices.
With the spot CPO price already hitting the magical RM2,000 per tonne, market players are wondering if the high price could be sustained on the commodity's own strength or if it would continue to take the lead from CBOT.
Dealers contacted said the current price represented a good entry level for a trading buy, but the lower-than-expected palm oil exports, potentially higher stocks at end-February, and lower CPO production were becoming major concerns among players.
Technically, our CPO prices are mainly driven by the CBOT rally, but fundamentally things are not as good as they seem, a dealer said.
He said market players were cautious about the low export figures for the past two months especially with major importers like India cutting its purchase due to a bumper crop there this year, China still having to release its oils and fats quota, and Europe's reluctance to buy due to the current high palm oil prices, despite the latter trading at a US$100 discount to soyoil.
Even CPO stocks are a cause for concern: market players are anxiously awaiting the release of the end-February stock figures which are hoped to be less than one million tonnes.
If this is achievable, then we can at least hope for a more sustainable CPO price, the dealer said.
CPO stocks stood at 1.07 million tonnes at end-January.
Meanwhile, another dealer expects a quiet CPO market by mid-week with most players like producers, traders, consumers and market observers attending the two-day Malaysia Derivatives Exchange (MDEX) Annual Palm & Lauric Oils Conference: Price Outlook 2004/2005. The conference begins in Kuala Lumpur tomorrow.
Highlights of the conference include talks on Price Outlook 2004/2005 by United Plantations Bhd vice-chairman Carl Bek-Nielsen, and Global Supply, Demand and Price Prospects by Oil World director Thomas Mielke. It will also feature the Lauric Oils Forum, which is timely in view of the newly launched palm kernel oil (PKO) futures on MDEX.
Other topics are China's Palm Oil Market Outlook and India's Bumper Monsoon Rain Impact of Price Outlook 2004-05.
The dealer suggested that the conference discuss ways to improve transparency on the CPO and PKO futures market.
He said the MDEX should emulate the CBOT whereby its clearing house would release a weekly Traders Commitment Report to clearly indicate weekly trading activities, showing the name of hedge buyers, sellers, speculators as well as lots traded and open-interest positions.