CPO futures to trade in yo-yo mode next week


  • CPO
  • Saturday, 20 Apr 2019

KUALA LUMPUR: Crude palm oil (CPO) futures on Bursa Malaysia Derivatives are likely to trade in a yo-yo mode next week, mainly due to worries over an economic slowdown in China, a dealer said.

Interband Group of Companies senior trader Jim Teh said however, physical buying of palm oil and palm oil products among Muslim countries, including some provinces in China would increase as the fasting month of Ramadan nears.

"We expect CPO may likely trade between RM2,100 and RM2,150 per tonne amid lower inventories that are currently below three million tonnes,” he told Bernama.

Commenting on China’s interest in buying more palm oil and palm oil related products from Malaysia, Teh said it is a welcome news to industry players, but the support would be for a short term.

"Do not forget that in the commodity market, be it CPO, soya bean, sugar, gold and rubber… there is always a cycle.

"When the prices go up, they will somehow come down and repeat themselves again,” he said.

To make the prices more sustainable, Teh said law enforcement should be tightened to cut out the middlemen or brokers.

He said as the production cost currently stands at about RM1,500 per tonne, smallholders and growers are not earning much due to the existence of intermediaries.

"Even though the licence for brokers and middlemen was abolished by the authorities some years ago, they are still around, taking the role of agents to smallholders, millers and refineries.

"This should not be happening. If we can buy an insurance policy directly from banks without engaging any agents, why can’t we do the same for the palm oil industry?” said Teh, adding that if brokers and middlemen could be eradicated, there would be more cost savings, while restoring integrity and ethical practices in the industry.

On a Friday-to-Friday basis, new spot month May 2019 declined RM1 to RM2,108 per tonne, June 2019 was RM10 higher at RM2,172 per tonne, July 2019 improved RM6 to RM2,190 per tonne, and August 2019 rose RM14 to RM2,201 per tonne.

Weekly turnover decreased to 168,764 lots from 234,127, while open interest narrowed to 240,528 contracts from 271,307 contracts.

On the physical market, new May South stood at RM2,100 a tonne. - Bernama

 

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