Crude Palm Oil At Two-Week High On Lower Output, Soy Crop - PalmOil HQ

Crude palm oil futures on Bursa Malaysia Derivatives extended gains Wednesday, as traders covered short positions due to concerns about U.S. soybean crop conditions, though expectations of slower export demand capped gains.

Benchmark November CPO settled at MYR3,042 a metric ton, up 1.9% from Tuesday's settlement, after rising 2.3% to MYR3,053/ton intraday, the highest since Aug. 24.

Lending support to the palm oil market are expectations of a drop in Malaysia's production that could reduce palm oil stock levels by 2%-3% to 1.93 million-1.95 million tons at the end of August, trade participants said.

Traders and planters said August output was likely 1.73 million tons compared with July's level of 1.75 million tons, as workers marked holidays during the Islamic fasting month, disrupting some harvesting rounds.

But the marginal fall in production will be temporary, as harvesting will gather pace this month, "when workers return to the estates," a planter in Johor said.

This could weigh on palm oil prices, which have dropped 22% since the beginning of the year, as rising output coincides with softening export demand, following months of strong outbound sales.

Exports could fall further in September, towards 1.40 million-1.50 million tons, as stocks at ports in major vegoil consuming countries, including China, are high, a trading executive in Singapore said.

Total palm oil stocks in Chinese ports reached 526,000 as of Sept. 6, a trading executive in Guangzhou said.

Still, bullish trade participants said the wide price gap of around $110-$140/ton between refined palm olein and crude soyoil could spur further buying interest over the next few days.

"Importers are purchasing the bare minimum where soyoil is concerned, as most have shifted to palm oil," said Vijay Mehta, a director at Singapore-based Commodity Link Pte. Ltd.

"Demand should pick up from next week, as more traders from Pakistan, Bangladesh and the Middle East return to the trading desk after the Eid holidays," Mehta said.

In the cash market, refined palm olein for January/February/March traded at $1,087.50/ton, free on board Malaysian ports, a Singapore-based broker said.

Cash CPO for prompt shipment was offered MYR40 higher at MYR3,150/ton.

Traded volume on the BMD reached 16,192 lots, compared with 22,974 lots Tuesday. One lot equals 25 tons.

Open interest was 133,068 contracts compared with 131,127 contracts Tuesday.