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 key industry data, Malaysia Palm Oil Board (MPOB), USDA supply-demand report.
CRUDE PALM OIL:
A contradictory trend was observed in crude palm oil between Malaysian and in domestic markets mainly due to volatility in currency followed by other major factors.
This week prices were highly volatile on currency, concern about palm oil demand and South America soy production.
Indian rupee has appreciated by 1.20 percent during the week which has weighed on domestic palm oil prices. Import become cheaper on strong Indian rupee.
Malaysian palm oil futures closed down 0.20 percent this week largely pressured by concern about demand as price gap with Argentina soy oil is at par.
Malaysian palm oil quoted at $702.5 per tonnes, whereas Argentine soy oil was traded at $702 at weekend.
Palm oil prices turned at premium to soy oil this season mainly due to lower production in Malaysia and Indonesia as an impact of last year El-Nino dryness last year, affected palm yields and fruits.
Meanwhile, South Peninsula Palm Oil Association (SPPOMA) has estimated Malaysia palm oil output to drop by another 5 percent during March, while estimated April 1-5 production higher by 29 percent.
On the other hand, market participants are still hopeful for Ramzan demand (May 26) from Asian countries and middle-east to revive by mid-April, but market players are doubtful whether it will support prices in large scale.
Currently, demand for palm oil in the domestic spot markets is as per requirement due to low demand from end-consumers. However, the same is likely to improve in coming weeks as palm oil is still cheaper with many other edible oils.
In addition to it, demand for palm oil is likely to rise due to ongoing marriage season and also from blenders for adulteration with other expensive oil for better realization.
Palm oil (CPO+RBD) stocks at various ports of the country dropped sharply 26 percent by April 4 and totaled 1.86 lakh tonnes, against 2.53 lakh tonnes on March 20.
In the domestic market, RBD Palmolein prices were up 1.12 percent at Kandla port in dollar terms, while prices were steady in rupee term.
In futures market this week, crude palm oil most active April delivery contract on Multi Commodity Exchange (MCX) closed 0.96 percent higher, while forward May contract was up 0.80 percent.
Upside for palm oil in local markets was capped due to appreciation in Indian rupee and prices managed to close in positive zone amid growing demand in spot market.
NEXT WEEK: Palm oil market likely to witness volatility ahead of Industry demand-supply data from MPOB, USDA and 1-10 April Malaysian palm oil exports, which will set direction.
In addition to it, dollar movement will also be in focus as the local currency rupee is in appreciation trend on expectations of more reforms by govt after Goods and Services Tax (GST).
Currency market will also focus on rising tension between U.S and Russia, Iran and Syria, coupled with uncertainty about U.S trade policy under president Donald Trump.
REFINED SOY OIL:
A weak tone was witnessed in refined soy oil market tracking subdued demand coupled with weak cues from U.S futures market. Soy oil declined 0.46 percent in benchmark Indore market.
Demand was subdued in the domestic market largely due to volatility in futures market coupled with falling palm oil prices, which is directly affecting other veg oil prices in the complex.
In addition to it, appreciation in rupee is also pressuring soy oil as import gets cheaper, and market participants opted to wait and watch before any big commitments.
Further, big negative factor affected soy oil demand as low price gap with other edible oil in the complex due to which demand was equally divided.
Currently, Ukrainian sunflower oil is trading at $720 per tonne, while Malaysian palm oil is quoted $702.5 and Argentine soy oil at $702.
According to market participants, demand for refined soy oil likely to improve in coming days due to ongoing marriage season followed by month-long Muslim festival "Ramzan".
Refined soy oil prices will also get support in near-term as rival mustard oil Kacchi Ghani is trading at a premium of Rs 11/Kg versus soy oil.
However, big upside for soy oil is not seen as supply for the same seen easily available from local global markets.
Soy oil prices were steady in dollar terms this week at Kandla port, but eased 0.46 percent in rupees term due to appreciation of Indian currency.
Soy oil stock at various ports of the country was steady at 1.23 lakh tonnes on April 4 against 1.21 lakh tonnes on March 20.
CBOT soy oil futures was down 0.50 percent this week largely due to robust crop of South America. Argentina soy oil FoB was also down.
In futures market, soy oil most-active May contract on the National Commodity & Derivatives Exchange Ltd (NCDEX) were lower 0.48 percent this week, while forward June contract was lower 0.36 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)
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