Have palm oil futures shaken off the blues?
They have proved a notably poor performers, even while prices elsewhere in the oilseeds complex, such as soybeans, have proved relatively resilient.
(Soybeans have been held up by the strong demand for soymeal, the feed ingredient, rather than soyoil, the other processing product, used in cooking oil, food and biodiesel, and a rival to palm oil.)
However, having in July touched 2,137 ringgit a tonne in Kuala Lumpur, the lowest since October 2009, Kuala Lumpur futures have staged a recovery which accelerated on Wednesday, when the benchmark January lot at one stage posted 3.0% gains, hitting 2,573 ringgit a tonne.
That was the highest in eight months, and 20 ringgit from levels not seen for a year.
'Very positive for palm oil'
The catalyst appears to be the supply and demand dynamic that Sipef, the plantations group, outlined last week, citing the prospect of inventories proving thinner than many investors have positioned for.
"Current production numbers in palm oil and better-than-expected demand will reflect a stocks carry out number by the end of this year that will be significantly lower than last year," the group said.
"In December 2012, 2.6 million tonnes of palm oil were carried over in Malaysia, but this year 2m tonnes seems out of reach.
"That is a substantial change compared to last year, the outlook into 2014 is therefore very positive for palm oil on its own."
Even though a large world soybean harvest may depress the oilseeds complex, "the discount of palm oil versus liquid oils will narrow by the end of the fourth quarter", Sipef said.
'Supply could be disrupted'
Certainly, demand has proven relatively firm, with cargo surveyor SGS reporting shipments from Malaysia, the second-ranked palm producer and exporter, rising 3.8% in the first 25 days of October from a 1-25 November figure which was pretty decent.
And concerns of production are rising too, with forecasts for storms over major palm-producing areas of Malaysia.
Luke Mathews at Commonwealth Bank of Australia flagged "fears supply could be disrupted because of current thunderstorm activity.
At Singapore-based Phillip Futures, Chee Tat warned that "showers and thunderstorms over major palm oil producing states in Malaysia could dampen palm oil output".
And this at a time when output is anyway expected to decline, thanks to a seasonal cycle.
'Current uptrend is stable'
Palm oil's performance prompted Phillip Futures to caution that it may reverse a bearish call on palm oil which has been a good bet.
"We believe that the current upward momentum is strong enough to boost for a break through at the 2,500 ringgit-a-tonne resistance level, thereby suggesting a possible trend reversal, from bearish to bullish, to take place," the broker said.
Technically, "we continue to see a good degree of separation between the short term and long term moving averages, which may suggest that the current uptrend is stable and sustainable".
Palm oil for January stood at 2,548 ringgit a tonne at 09:20 UK time (04:20 Chicago time), a gain of 2.0%.
Long-term bounce?
And that proved a help to soyoil too in Chicago, where the December contract gained 1.2% to 41.45 cents a pound, albeit far from posting eight-month highs.
Still, an October 2 bottom at 39.09 cents a pound represents "the likely cycle low", said Anne Frick, senior oilseed analyst at New York-based Jefferies Bache.
"In terms of timing, the market is overdue for a cycle low, in our view. We think that soyoil is beginning the bullish phase of its price cycle."
And, normally, "that bullish phase would extend for two seasons".
'Rallies meant to be sold'
With December soymeal firm too, adding 0.4% to $412.50 a short ton in Chicago, soybeans themselves had little choice but to post some gains, adding 0.5% to $12.85 ¾ a bushel.
The oilseed is continuing to receive some pressure from the US harvest, and the spike in supplies it brings, although with 77% of the crop now in the barn that may fade a touch.
Another threat is the better planting weather for soybeans in Argentina and Brazil, with rains refreshing dry soils.
"The lack of a current South American weather threat and an outlook for record Brazil and Argentine production will work to cap gains and push demand out to the spring months," Kim Rugel at Benson Quinn Commodities said.
"Rallies are still meant to be sold."
Data ahead
Still, one factor supporting soybeans, and other Chicago crops too, is the prospect of the US Department of Agriculture on Thursday filling in the blanks on the country's crop export records left by the Washington shutdown.
The USDA will release export sales not just for the week of October 24, as would be expected, but for the weeks ending October 10 and October 17 too.
And there are some concerns that this could produce bumper figures, as importers bought under the radar, with the USDA statistical function disabled.
(There is talk that this could be the case for cotton, as well as grains, with CBA's Luke Mathews saying that "despite the current bearish mood, there are numerous reports of robust physical demand at these prices.
"Consequently, Thursday's US export sales report is keenly awaited," although cotton for December was not getting too excited in New York, falling 0.2% to 78.18 cents a pound and setting a fresh nine-month low.)
'No large sell stops'
For corn, however - in which hedge funds already have a record net short position, raising the potential for a spike in prices if these holdings get closed – the prospect of the data encouraged a 0.3% rise to $4.33 ¼ a bushel in Chicago's December lot.
Phillip Futures also noted "forecasts of rainfall affecting the whole US Midwest over the next two days, which would bring harvesting of the crop to a halt.
"This would support US corn prices, at least until the showers dissipate and harvesting is resumed."
Technically, the grain also got support from growing ideas of a strong US harvest yield by the December contract's recovery from a three-year low in the last session to close higher.
"At least for now no large sell stops were found under $4.30 a bushel, yet," Mike Mawdsley at broker Market 1 said.
'Frost damage more extensive'
And wheat gained too, up 0.6% at $6.85 a bushel in Chicago for December delivery, helped by corn's resilience but also concerns over the harvests in the two top southern hemisphere producers – Argentina and Australia.
While dry Argentine crops have received rain, has it come too late?
"It remains to be seen if the improvement in weather condition would significantly improve wheat output," Phillip Futures said.
And as for Australia, CBA's Luke Mathews noted that "there are reports coming out of southern New South Wales and northern Victoria this morning that frost damage is more extensive than first thought".
Source : Agrimoney
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