Will March data break palm oil bull trend?

OBSERVATIONS: The Kuala Lumpur CPO futures market sizzled at first, soaring in early trade on follow-through buying interest from the previous week.

The actively-traded June 2009 contract leaped to an intra-week high of RM2,078, then dropped on profit-taking to a low of RM1,955 before recovering some to close last Friday at RM1,990 a tonne, up a nominal RM5 or 0.25 per cent over the week.

The US soyabean oil futures market, like the local CPO futures market, suffered a price relapse last Friday. Soyabean oil for May delivery on the Chicago Board of Trade settled at the close of trade last week at 32.42 US cents a pound, up a mere 17 points or 0.53 percent over the week

The poor month to-date performance of palm oil exports could be fingered as the cause of the sudden drop in investor confidence in late trade last week.

Swiss export monitor Societie Generale de Surveillance and Intertek Agri Services put March 1- 25 exports of palm oil at 952,365 tonnes and 908,404 tonnes respectively, representing a drop of an average of some 75,000 tonnes or 7.43 per cent compared to that for the similar period in the previous month.

All eyes will be on the export estimates for March, due tomorrow.

Conclusion: Although the technicals suggest that the short-term bull trend is still intact a particularly poor export performance for March could well be the undoing of this market’s short-term bull trend. And there also is next week’s Malaysian Palm Oil Board report on March trade data and end-month stocks to keep market players on tenterhooks.

The immediate support level is RM1,860, and the immediate overhead resistance level is RM2,035 a tonne, basis the June 2009 contract.