Mumbai (commoditiescontrol) - Edible oil witnessed huge volatility during the week on currency factor and likely to continue next week as well due to uncertain cues ahead of important data Malaysia Palm Oil Board (MPOB) supply-demand report..
CRUDE PALM OIL:
A contradictory trend was observed in crude palm oil between Malaysian and here in domestic markets amid currency volatility followed by other major factors.
This week prices were highly volatility on currency, concern about palm oil demand and Argentina soy production.
Malaysian palm oil futures closed down 1.1 percent this week largely pressured by concern about demand at higher level as the price gap with rival soy oil has narrowed to $57 per tonnes.
Generally price gap remains on higher side of around $80-90 during winter as the same solidifies in cold weather and demand shifts to rival oil.
But, this year palm oil prices were drawing support from weak production as an impact of last year El-Nino dryness, which has affected palm yields and fruits.
A latest survey conducted by various agencies revealed, palm oil production likely to fall 8 percent in month of December after 6 percent drop in November.
While, South Peninsula Palm Oil Association (SPPOMA) has estimated output dropped by another 14 percent during 1-5 January.
In addition to it, there are reports of Argentina soybean crops were under severe stress due to adverse weather in last couple of months, due to which supply of soy oil is threatened and fueled market sentiment.
But, the big turnaround came from currency factor as local currency Ringgit closed 0.3 percent higher at weekend, after hitting 19-Year low of 4.5 ringgit per dollar.
The strength in ringgit, pushed crude palm oil prices lower towards weekend.
On the other hand, market participants are still hopeful for demand from China to revive ahead of re-stocking for week-long Chinese New Year starting in month end.
Palm oil stock at Chinese ports were totaled 3.41 lakh tonnes as on 06-December, against 8.24 lakh tonnes during same period last year.
Demand from India, the second biggest consumer, likely to remain laggard as demonetisation has largely affected demand in spot market as end-consumers are buying as per requirement.
Palm oil stocks at various ports of the country totaled 2.77 lakh tonnes as 26-December, against 4.15 lakh tonnes during same period last year.
Cargo surveyors have reported palm oil export fell 2-6 percent during full December month. The data is very encouraging against fall of 14 percent during 1-20 percent.
In domestic market, demand for palm oil which is currently weak due to cold weather, likely to improve in coming weeks, once temperature starts rising and with squeezed supply and stock, prices likely to remain stable to positive in near-term.
Apart from low stocks at ports, Palm oil import has also been down by 11.2 percent in month of November against same period last year and the same is expected for month of December, due to demonetisation.
Malaysian Palm oil price gap with Argentina soy oil has reduced to $57 per tonnes as on 06-January against $101 on 09-December.
During the week, RBD Palmolein dropped dropped $2.5-5 per tonnes in FoB term.
In domestic market, RBD Palmolein prices was down 0.64 percent at kandla port in dollar while prices were steady in Rupee terms.
In futures market this week, crude palm oil most active January delivery contract on Multi Commodity Exchange (MCX) closed 2 percent higher, while forward February contract was up 1.85 percent.
NEXT WEEK: Volatility likely to continue in palm oil market ahead of MPOB, USDA and 1-10 January palm oil exports data from SGS and ITS.
In addition to it, dollar movement will also be in focus on rising concern about U.S trade policy under newly elected president Donald Trump.
REFINED SOY OIL:
A positive tone was also witnessed in refined soy oil market tracking on steady demand coupled with steady to positive cues from U.S futures market. Soy oil rose 1.1 percent in benchmark Indore market.
Demand was steady largely due to cold weather which attracted demand shift from palm oil.
However, big negative factor affected soy oil demand was low price gap with other edible oil in the compex, due to which demand was equally divided.
Currently sunflower oil is trading at $32 per tonnes discount to soy oil as on 06-January against $57 on 02-December. While price gap with rival palm oil is $57.
Argentina soy oil quoted $807 per tonne while Ukrainian sunflower oil was $775.
The other rival mustard oil price gap has also dropped to Rs 10/Kg against Rs 20 in November.
Soy oil prices was down 0.23 percent in dollar terms this week at Kandla port, prices gained 0.7 percent in Rupees terms.
Soy oil stock at various ports of the country have reduced to 1-year low at 1.30 lakh tonne as on 26-December, against 1.59 lakh tonnes on 4-January in 2016.
CBot soy oil futures was up 1 percent this week largely due to Argentina crop worry due to weather factor and supporting prices at local market also.
Argentina soy oil FoB was up 1 percent.
In futures market, soy oil most active January contract on the National Commodity & Derivatives Exchange Ltd (NCDEX) were higher 1.4 percent this week, while forward February contract was up 1.3 percent.
NEXT WEEK: soy oil in near-term will continue to trade on price factor with other veg oil in the complex and volatility to rise tracking global markets and rupee movement.
(By Commoditiescontrol Bureau; +91-22-40015516)