August 6, 2004

 

 

Asian Cash Palm Oil Prices Higher; Malaysia Up On Strong Demand

 

Asian cash palm oil prices were firmer Friday, with products in Malaysia slightly higher, helped by gains in the futures market and strong buying interest in recent days.

 

Palm oil prices were mostly on a decline last week, but have rebounded this week amid indications of improved exports.

 

Following a sluggish first half, demand for palm oil has picked up since the start of the second half of the year. Estimates from cargo surveyors issued earlier this week indicate a rise of as much as 17% in exports in July.

 

Recent keen buying interest from major consumers China and India has fueled optimism that exports may continue to show strong growth in August and beyond.

 

Higher domestic selling prices, declining stock levels and major upcoming festivals in September and October have encouraged fresh purchases from China, the world's biggest importer of palm oil.

 

China celebrates its Mid-Autumn Festival at end-September, followed by week-long holidays in early October for National Day.

 

Demand from India has also improved in recent weeks as importers seek to take advantage of improved margins for domestic sales. Edible oil prices in India have strengthened amid concerns that poor rainfall in July may have damaged the country's oilseeds crop.

 

Traders said rising freight rates are an indication of the strong demand from India.

 

"Freight to India has become very tight and as a result, rates have gone up to around $28 to $32 (a ton) to various parts of the country," a trader said, adding that a few months earlier, rates were "in the low $20s."

 

Meanwhile, private surveyor Palmis Management Bhd. estimated Malaysia's July CPO output at 1.220 million metric tons, up from the 1.17 million tons produced in June, said traders familiar with the latest Palmis report.

 

According to traders who obtained the data, Palmis estimated July palm oil exports at 1.055 million tons, up from 886,376 tons in June.

 

Palmis pegged end-July stocks at 1.305 million tons, up from 1.21 million tons at end-June.

 

Palmis is the only private palm oil crop forecaster in Malaysia, and its production, export and stock forecasts are closely watched by the market.

 

Traders said the figures were slightly friendly.

 

"The production and end-stocks were revised a little bit lower (from Palmis' July 21 estimate). So that looks a little bit positive for prices because stocks are not as burdensome as some had feared," a trader said.

 

Palmis is expected to release next Wednesday its final estimates for July.

 

A day later, the government-run Malaysian Palm Oil Board will issue official July supply and demand data.

 

At 0751 GMT, the benchmark October CPO futures contract on the Bursa Malaysia Derivatives was at 1,451 ringgit ($1=MYR3.8) a ton, up MYR17 from Thursday.

 

Prices in the Malaysian cash market also rose.

 

CPO for August shipment was offered at MYR1,500 ringgit/ton, up MYR20 from Thursday, delivered basis in South Malaysia.

 

RBD palm olein for August shipment was offered at $427.50/ton, up $2.5 from Thursday.

 

RBD palm oil for August shipment was at $417.50/ton, also up $2.5.

 

In Indonesia, RBD palm olein in Jakarta was offered at 4,300 rupiah ($1=IDR9,180) a kilogram, up IDR59 from Thursday.

 

CPO in Medan was offered for around IDR3,712-IDR3,765/kg, traders said. Thursday, the government sold CPO at its semiweekly auction for as much as IDR3,693/kg.