Asian Crude Palm Oil Extends Losses Amid Fears Of Japan Quake

Crude palm oil futures on Malaysia’s derivatives exchange extended losses Friday mostly tracking crude and the Dalian soy complex, after a strong earthquake hit Japan, weighing on commodity demand. Concerns about inflationary pressures in China, with the CPI estimated to have risen 4.9% in February compared with a year earlier, also led to a bearish market sentiment, said market participants.

CBOT May soyoil settled 0.3% lower at 56.93 cents a pound overnight as USDA raised its soybean harvest forecast for Brazil. The contract was trading 81 points lower in screen trade around 0945 GMT.

The benchmark May contract on the Bursa Malaysia Derivatives ended MYR95 lower at MYR3,364 a metric ton, off an intraday high of MYR3,483/ton.

A trading executive in Kuala Lumpur pegged immediate support for BMD Crude Palm Oil (CPO) futures at MYR3,300/ton levels in the next few sessions.

CPO prices may have peaked and “are likely to come off during the course of the year as we expect production to grow in light of better fertilization last year and a likely return to ENSO (El Nino/La Nina-Southern Oscillation) neutral conditions by the middle of this year,” said Macquarie Wednesday, pegging CPO estimates on an average for 2011 at MYR3,425/ton, and at MY3,050/ton for 2012.

But the key risks to the thesis would be a significant shift in U.S. acreage away from soybeans this summer even though it’s unlikely and a spike in crude oil prices, which may increase biodiesel demand, the bank said.

Malaysia’s February inventory data released Thursday by the government-linked Malaysian Palm Oil Board is bearish for CPO prices, as supply tightness has eased compared with January, said Daiwa Capital Markets.

The MPOB estimated end-February stock levels rose 4.2% to 1.48 million tons, compared with market expectations for inventories of 1.39 million-1.40 million tons.

Output in the world’s second-largest producer after Indonesia rose 3.5% from the previous month, to 1.09 million tons, according to MPOB.

Traders are expecting fresh cues from an oilseeds conference in the U.S. commencing March 13 where top vegoil analyst James Fry is scheduled to speak.

Fry had given a bearish outlook at Bursa Malaysia’s Palm Oil Conference and Price Outlook this week, saying that BMD Crude Palm Oil (CPO) futures may fall to MYR2,250/ton in the second half as CPO output rises in Malaysia and Indonesia and inflation-fighting measures in various countries crimp demand.

The most active rupiah-denominated CPO contract for May on the Indonesia Commodity & Derivatives Exchange was last traded 0.9% lower at IDR10,055 a kilogram around 0955 GMT.

In the cash market, refined palm olein for April shipment was traded at $1,205-$1,207.50/ton and July, August, September shipment was traded at $1145/ton, free on board Malaysian ports, said a Singapore-based physical market broker.

Cash CPO for prompt shipment was offered MYR60 lower at MYR3,500/ton.

Open interest on the BMD was 96,456 lots, versus 95,887 lots Thursday. One lot is equivalent to 25 tons.

A total of 33,383 lots of CPO were traded versus 24,861 lots Thursday.