CPO futures rise on farmers’ strike

Petaling Jaya
by Loong Tse Min

Crude palm oil (CPO) futures pushed past RM2,000 per tonne yesterday as a farmers’ strike in Argentina threatens soybean exports and on a delay by India to implement a previously announced removal of a 20% import duty on crude soybean oil.

CPO futures for the benchmark June delivery ended the day up RM45 to RM2,030 per tonne, closing above RM2,000 per tonne for the first time since September last year.

Bloomberg reported that a weaker US dollar was also driving international investors back into commodities, including CPO and soybean oil.

However, Kuala Lumpur-based Interband Group palm oil trader Jim Teh said CPO gains in the past few days were likely due to speculative play, pointing out that the gains had been accompanied by low volumes.

“Above RM2,000 today (Monday) is speculative play in tandem with crude oil,” he said.

In the event that the duty cut on soyoil in India goes through, Teh expects this to put a dent in demand for CPO from India.

“Demand for India may be down next month or not sustain beyond the second half of this year,” he said, forecasting CPO to trade between RM1,800 to RM1,900 next month.

On Friday, Bloomberg reported that the Indian government had yet to give notification on the removal of the 20% import duty on crude soybean oil.

India authoritiees had also declined to say when changes in the tax would be made, according to the report.

Last Thursday, India trade secretary G. K. Pillai was reported as saying that the import tax on crude soybean oil would be scrapped, causing CPO prices to pare gains that day.

A report from a foreign brokerage with offices in Kuala Lumpur said India’s move to scrap the duty on soybean oil would “put all edible oil imports into India on an equal footing”. However, the report said the impact would be minimal on CPO, pointing out that sunflower oil would take a bigger hit as its price was about the same as soybean oil.

“While the scrapping of the import duty on crude soybean oil removes a pricing anomaly relative to CPO, we note that even without an import duty, CPO still trades at a 15% discount to crude soybean oil.

“As a result, we do not expect a significant shift in demand between the two oils,” the report said.