Business Times CPO futures -- bullishness still there, so is volatility

OBSERVATIONS: The rip-roaring Kuala Lumpur CPO futures market soared above RM2,600 a tonne to an eight-month and new 2009 high last week. Market players appeared brimming with confidence and conviction that palm oil stocks are headed for a substantial drop, thanks to robust export demand, a substantial drop in production due to a replanting programme, and tight world supplies of edible oils.

The actively-traded July 2009 contract was traded to a new high for the year of RM2,648 a tonne last week. It settled at RM2,585, up a whopping RM150 or 6.16 per cent over the week.

Market talk is that end-April 2009 palm oil stocks could drop to as low as 1.2 million tonnes from last month's 1.36 tonnes, although the latest export estimates, per se, do not appear mathematically to support such a drastic collapse in the level of stocks.

Swiss export monitor Societe Generale de Surveillance put April 1-20 exports of palm oil at 747,575 tonnes, up a mere 6,178 tonnes, or 0.83 per cent, from that for the similar period of the previous month.

The April 1-25 export estimates, which should be public knowledge today, may or may not support market players' conviction (or delusion) of a robust export picture for palm oil.

Conclusion: The technical indicators overall are still bullish.

Although minor cracks have appeared in the technical picture, that should not be much of a worry for the bulls for now.

It should be more of the same volatile trade with wild and wide price swings this week.

The short-term support level is RM2,335.