CPO tumbles on weak SBO, equity markets

18 March 2008 09:29  [Source: ICIS news]

(ICIS news)--Crude palm oil (CPO) futures traded on Bursa Malaysia for May delivery tumbled by more than ringgit (M$) 400/tonne ($125/tonne) on Tuesday from their previous close of M$3,600/tonne.

 

Benchmark May delivery CPO futures fell as low as M$3,180/tonne on Tuesday afternoon on the back of similar drops in global commodity and crude values, before rebounding slightly. They traded at M$3,305/tonne at 4:41pm local time, the exchange reported on its website.

 

Exacerbating the situation was a drop in soybean oil (SBO) prices, traders said. Prices generally move in tandem with CPO, as SBO is traditionally regarded as a substitute for CPO for food and biofuel applications.

 

“Three [SBO buying] parties defaulted [on their contracts] in China today,” a Singapore-based vegetable oil trader said, explaining that the defaults would lead to an excess of imported SBO in the region, resulting in “shocks in the physical market”, and weighing down prices.

 

SBO futures for May delivery traded on the Chicago Board of Trade fell to 56.56 cents/lb ($1,247/tonne), a 2 cent/lb drop from Monday’s close.

 

Other traders also cited the rapid exit of speculative traders as a contributing factor, as bearishness in global stock markets applied downward pressure on prices. “The funds are moving out of the market,” a regional vegetable oil trader said.

 

($1=M$3.20)

 

ICIS Copyright © Reed Business Information 2009

Author: Jeremiah Chan
+65 6780 4359

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