September 13, 2012 / 5:31 AM / 5 years ago

VEGOILS-Rising stocks to drag on palm oil futures

(updates prices)
    * Climbing palm oil output to weigh on prices
    * Palm oil to end rebound around 2,960 ringgit-technicals
    * Prices downside limited by palm oil's widening discount to
soyoil

    By Anuradha Raghu
    KUALA LUMPUR, Sept 13 (Reuters) - Malaysian palm oil futures
dropped on Thursday on expectations of output rising this month
that could lead to a stock build-up, although losses were
limited by expectations of strong Asian demand and tight supply
of competing soyoil.
    Palm oil prices have lost 8 percent so far this year thanks
to the euro zone debt crisis stirring concerns of weaker global
growth and commodity demand. In recent weeks, palm oil has
dropped below 3,000 ringgit on rising stocks.
    "The market is bearish. There's no doubt about it because
fundamentally stocks are very high and there is no sign that
production is slowing down," said a trader with a local
commodities brokerage.
    "Everybody knows at the back of their mind that production
is climbing higher towards the peak, maybe in October," the
trader added.
    The benchmark November contract on the Bursa
Malaysia Derivatives Exchange ended down 0.6 percent to 2,912
ringgit ($944.8) per tonne.
    Total traded volume stood at 32,384 lots of 25 tonnes each,
higher than the usual 24,000 lots.
    Technicals showed palm oil will end its current rebound
around a resistance at 2,960 ringgit per tonne and drop back to
its Sept. 11 low of 2,874 ringgit, said Reuters market analyst
Wang Tao. 
    Traders have said the palm oil's widening discount to soyoil
limit prices from falling as consumers shift their purchases to
the tropical oil produced in Indonesia and Malaysia.
    "Palm oil is now so much discounted against soy bean oil
with the cap reaching $300. The market is just waiting for the
time to bounce back and climb higher. Eventually, demand will
start setting in," said the trader.
    For now, palm oil's discount to soyoil could widen further
after the U.S. Department of Agriculture cut its estimate of the
soybean crop in the world's top grain-exporting nation.
    The USDA pegged the soybean harvest at 2.634 billion
bushels, down from last month's 2.692 billion and below
analysts' average estimate of 2.657 billion. Ending stocks next
summer were projected to be the lowest in nine years at 115
million, unchanged from August' s estimate. 
    Oil futures rose above $116 a barrel on Thursday as
investors awaited a U.S. Federal Reserve announcement, expected
to include more stimulus action to bolster the economy of the
world's biggest oil buyer.   
    In other vegetable oil markets, U.S. soyoil for December
delivery inched up 0.2 percent. The most active January
2013 soyoil contract on the Dalian Commodity Exchange
rose 0.7 percent.
    
  
  Palm, soy and crude oil prices at 1007 GMT
                                                                                               
  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      SEP2       0    +0.00       0       0       0
  MY PALM OIL      OCT2    2855   -24.00    2847    2897     619
  MY PALM OIL      NOV2    2912   -18.00    2894    2948   16201
  CHINA PALM OLEIN JAN3    7946   +28.00    7940    8034  246730
  CHINA SOYOIL     JAN3   10060   +74.00   10050   10140  533740
  CBOT SOY OIL     DEC2   56.57    +0.09   56.32   56.84    6249
  NYMEX CRUDE      OCT2   97.10    +0.09   96.75   97.27   14187
                                                                                               
  Palm oil prices in Malaysian ringgit per tonne
  CBOT soy oil in U.S. cents per pound
  Dalian soy oil and RBD palm olein in Chinese yuan per tonne
  Crude in U.S. dollars per barrel
 

 (Editing by Niluksi Koswanage)

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