Mumbai (commoditiescontrol) - A weak sentiment was witnessed in domestic edible oil market amid bearish international cues followed by uncertainty about U.S trade policy and ahead of India union budget.
CRUDE PALM OIL:
Crude palm oil witnessed huge volatility on Bursa Malaysia Derivatives largely pressured by rising concern about recovery in production coupled with slow export demand.
Malaysia palm oil exports for period of January 1-25 dropped 9 percent against 20 percent higher during January 1-20 period raising concern about demand, according to cargo surveyor report.
In addition to it, data released by SPPOMA (South Peninsula Palm Oil Millers Assoc.) revealed that production of crude palm oil recovered from down 11 percent on January 1-15 to 6 percent between January 1-20.
In another news, Malaysia has hiked CPO export tax to 7.5 percent for February month against 7 percent in January, while Indonesia, No. 1 crude palm oil producer, raised CPO export tax six fold to $18 per tonnes against $3 in January.
According to market participants, outlook for regional oil is fragile as hike in export tax may slow down demand amid improving production.
Malaysian currency ringgit turned strong by 0.27 percent which has also pressured crude palm oil.
In domestic market, fresh enquiries were witnessed this week as temperature started to rise, but uplifting continued to remain weak following volatility in futures market.
Palm oil stocks at various ports of the country totaled 2.29 lakh tonnes as on January 23, against 2.25 lakh tonnes on January 16.
The rise in stock is sufficient to meet any immediate demand and may lid on any big surge in prices, unless supply from producing regions are squeezed.
RBD Palmolein rose 1.3 percent at Kandla port in dollar terms (CNF) this week, while prices were mostly flat in rupee terms.
In futures market, benchmark Malaysian palm oil closed 1 percent lower, while prices at local bourses dropped inline with global cues.
The most active Crude palm oil February contract on Multi Commodity Exchange (MCX) close down 0.7 percent, while forward March contract was lower 1.24 percent.
NEXT WEEK: Volatility likely to continue in palm oil market as funds will be focusing on Union Budget 2017 coupled with demand in spot market as temperature is rising.
Market will also focus on full January month export data from cargo surveyors and production estimate from South Peninsula Palm Oil Millers Assoc. (SPPOMA).
REFINED SOY OIL:
A weak tone was witnessed in refined soy oil in benchmark Indore market of Madhya Pradesh largely pressured by sluggish demand weak global cues.
The big trigger came from weakness in U.S soy oil futures on growing uncertainty about bio-diesel program under Trump's policy for which U.S Environment Protection Agency (EPA) in November 2016 hiked bio-fuel mandate for 2017.
Soy oil futures on CBot has dropped below bio-diesel mandate was hike in November 2016.
In addition to it, market will be also keeping close eye on China reaction for U.S goods, if Trump changes policy under Trans Pacific Partnership (TPP). In such situation, China demand may divert to South American supply or to other edible oil like Canola and Palm.
U.S soy oil futures closed down 2.5 percent this week.
In domestic market, soy oil prices were largely pressured by equally divided demand with other oil in the complex due to narrow price gap.
Currently rival Malaysian palm oil turned premium by $10 per tonnes against Argentina soy oil in FoB terms.
Argentina soy oil FoB was down 6.2 percent this week.
According to cargo surveyors, soy oil stock at various ports of the country has dropped to 99,575 tonnes as on January 23 against 1.25 lakh tonnes on January 16.
Market participants are expecting prices likely to stabilize at current level after this week fall and supply shortage. However, uncertainty may continue as U.S soy oil and Malaysian palm oil futures are fragile on global trade factors coupled with improving production.
Mustard seed new crop arrival may rise in coming days, which may increase supply of mustard oil in local market and keep lid on prices of other edible oil in the complex.
Soy oil prices in benchmark Indore market was down 1 percent this week, while prices dropped 4.8 percent in dollar terms (CNF) at Kandla port and was weak by 2.8 percent in Rupees terms.
In futures market, soy oil most active February contract on the National Commodity & Derivatives Exchange Ltd (NCDEX) was down 2 percent this week, while forward contract was lower 2.6 percent.
NEXT WEEK: soy oil likely to trade with negative sentiment on sluggish demand in spot market and prices seen volatile tracking dollar and CBot movement. Over-all prime focus will remain on demand.
In addition to it, market will also focus on Union Budget 2017 and progress with U.S bio-diesel mandate under Trump's policy.
(By Commoditiescontrol Bureau; +91-22-40015516)