Business Times CPO futures -- further consolidation expected

OBSERVATIONS: Buy the rumour, sell the news - that was what the Kuala Lumpur CPO futures market players did last week.

Rumour had it that palm oil stocks would fall to between 1.6 million and 1.7 million tonnes, because of a weather-related seasonal decline in production and an improved export picture. Market players bought the rumour, lifting the actively-traded May 2009 contract up to a high of RM2,026 a tonne in early trade last Wednesday, which also happened to be the day when the Malaysian Palm Oil Board (MPOB) unveiled its report on February 2009 trade data and end-February palm oil stocks.

The MPOB reported a 143,000-tonne drop in February production and a 97,000-tonne fall in palm oil exports, compared to that for January. How that could have resulted in a 268,000-tonne drop or a 14.66 per cent decline in end-February stocks to 1,561,151 tonnes boggles the mind. Not since October 2007 have stocks been this low. But the MPOB is the final authority on palm oil trade statistics and we have to take their word as the gospel truth.

So the news was better than expected. The1.561 million tonnes of palm oil stocks was lower than the expected - or hoped for - 1.6 million to 1.7 million tonnes of stocks.
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