Crude Palm Oil Ends Up on Short Covering, CBOT Soyoil

Crude palm oil futures on Malaysia’s derivatives exchange ended up Tuesday, tracking gains in Chicago soyoil and as investors covered short positions after last week’s tumble.
Palm oil plunged to a three-year low last week of MYR2,230 a metric ton, weighed by concern about contract renegotiations and cargo defaults at a time when global vegetable oil supplies are rising due to seasonally higher production in Southeast Asia and the fast pace of the harvest of the U.S. Midwest soy crop.

Market participants also adjusted positions to reduce risk ahead of the Malaysian Palm Oil Board September crop report Wednesday and a monthly crop report by the U.S. Department of Agriculture Thursday.
The benchmark December contract at Bursa Malaysia Derivatives ended 3% higher at 2,438 ringgit a metric ton after moving in a MYR2,392-MYR2,455/ton range.
CBOT December soyoil futures were last trading 1.5% higher at 51.64 cents a pound at 1053 GMT.
Palm oil prices will likely edge higher next year, as inventories could be drawn down when the peak production season in Southeast Asia tapers off, analysts at Nomura equity research said.
"We don't believe a significant amount of demand destruction for palm oil will take place," said analyst Tanuj Shori, who expects Chinese and Indian refiners to switch to palm oil due to a wide price gap between palm and soyoil.
Palm oil is being offered at a steep discount of $350/ton to rival soyoil, compared with a historical average of $100/ton.
In the cash market, refined palm olein for October was offered at $800/ton, while cash CPO for prompt shipment was offered at MYR2,270/ton.
Open interest on the BMD was 134,894 lots versus 160,500 lots Monday. One lot is equivalent to 25 tons.(POHQ)