Malaysian Palm Oil December futures declined by 3.45 percent to close at MYR 2,737/tonne during the week ending 21st September amid long liquidation coupled with weak CBOT soy oil December futures which declined by 1.52% during the week to end at 34.22 cents per pound. Market sentiment was under pressure due to a lack of buying confidence as production is showing some improvement in Indonesia. Indonesia January to July 2017 production surged by 21% compared to same time last year. Annual production is expected to reach 34.5 to 35.0 million tons from 33.0 million tons last year or up 6%. With peak production to come in September to November, Indonesia production has so far reached 21.90 million tons, with a further 13.00 million tons to be produced in the next 5 months. Indonesia July exports jumped to the highest pace in 8 months after notching an impressive 13.22% rise to 2.535 million tons from the previous month, according latest GAPKI data. Exports rose after shipment to all main destinations, increased except for the U.S. Shipment to China recovered to rise by 53% to 167,280 tons in July after falling to low of 109,000 tons June . Monthly average shipment to China is around 250,000 tons. Output rose by almost the same pace at 12.77% to 3.752 million tons, the highest since January 2016, when GAPKI started publishing its data on public domain. Production recovered after remaining unchanged from May to June at 3.330 million tons. Domestic consumption fell for second consecutive month in July by 7.55% to 821,000 tons, persisting to with low growth since the start of this year. With export demand soaking up all additional production, a drop in domestic consumption helped to keep end month stocks 17.03% higher from June to 2.721 million tons. GAPKI revised its June ending stocks by 1.504 million tons after underestimating the reserves in barges, ports and refineries throughout the country. Domestic RBD Palmolein Scenario RBD palmoelin declined by Rs 5 at Rs 595/10kg at kandla port amid tight selling and also CIF price of the commodity has declined by USD 22.5 to trade $725/tonne on bearish Malaysian palm oil futures. Spot RBD palmolein prices declined due to sluggish demand. However the the prices of the commodity in domestic market has declined slightly as compared to drastic fall in international market due to weakness in rupee which makes the import of RBD palmolein costlier. The rupee fell to a nearly 6-month low of 65.14 against the US dollar, its lowest since April this year. Further importers have stopped bulk purchases as the import of RBD palmolein is costlier by Rs 13/10kg which is likely to create supply shortage in local markets in medium term. Demand of RBD palmolein in domestic market is hand to mouth as most of the wholesale and retail traders have covered their near term requirement.
The RBD-Soy oil CIF difference has increased to $120 from $102.5 a week ago which will support imports of RBD palmolein in near term. NEXT WEEK: RBD palmolein prices are likely to trade sideways bias as sluggish demand will demand will weigh on prices whereas depreciating rupee will provide support at lower level.
(By Commoditiescontrol Bureau; +91-22-40015516)
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