MUMBAI(Commoditiescontrol): This week prices of RBD palmolein declined on account of poor domestic demand coupled with concern about rising production in Malaysia and Indonesia. Generally FOB price gap between palm oil and soy oil remains on higher side of around $80-100 during June month but now the price gap is of $45 which is considered on lower side so most of the demand has shifted to soy oil. Most of the wholesale traders have covered their near term requirements and in coming days if the price gap between soy oil and palm oil remains low then palm oil is likely to remain under pressure in coming days. RBD Palmolein prices were lower by USD 15 to trade at 705 per tonne in dollar terms (CNF) at Kandla port and also declined by Rs 10 to trade at Rs 540/10kg in rupee terms. Demand from India, the second biggest consumer, likely to remain low in spot market as end-consumers are buying as per requirement. Malaysia CPO May output is set to rise just above the average of the last 3 years May production to 1.627 million tons, i.e. 6000 tons more. This would be the highest production for the year and the best since November of last year. Production been improving month on month and year-on-year this year after the impact of severe El-Nino curtailing production last year. However improvement in production been slow with January to April production rising by just 1.40% in 2017 compared to same time in 2015 i.e. before El-Nino struck .
While prices been re-acting negatively in response to the rise in production, the rise however has not been convincing to warrant supply glut. Latest MPOA data for full month May released yesterday showed May output increasing by 5.3% to 1.63 million tons. While demand is seen recording robust rise in May, averaging 14.8% mainly due to Ramadan seasonal demand when large amounts of edible oil is used, the market been questioning post Ramadan demand in absorbing the future rebound in production.With production rise entrenched in sentiments, and export demand in questions, end month stocks continue to linger at historical low levels. We feel end month stocks will be the main variable in helping to reverse prices from current levels to above the psychological level of above RM 2500. Actual MPOB data is due on 13 June. Focus on end month stocks. Estimated to be between unchanged to a rise of 1.5%. Malaysian palm oil futures closed down 1.60 percent this week at MYR 2,457/tonne on account of improving production in top producing nations Malaysia and Indonesia. In futures market this week, RBD Pamolein most active June delivery contract on Multi Commodity Exchange (MCX) closed 1.30 percent lower at Rs 529.80/10kg. NEXT WEEK: Volatility likely to continue in palm oil market ahead of MPOB and 1-10 May palm oil exports data from SGS and ITS.(By Commoditiescontrol Bureau; +91-22-40015533)
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