Palm Oil in the Year of the Horse: 24th April, 2014
Dear Friends & Associates,
Mother nature defied the weather man’s call for more hot and dry spell as intermediate rain fell in much of late-March and April with the weather pattern shifting to the South-West monsoon.
Would the El Nino phenomena make a comeback? And how would palm oil prices react in days ahead. Output of fresh fruit bunches would drop sharply over the next eight to ten months in event of such a possibility and prices are set to enter into another round of bullish momentum.
Historically speaking, El Nino events tend to develop during the period March-May and they tend to reach their maximum strength during December-February and typically persist for nine to twelve months and occasionally persisting for up to two years. Traders would continue to look to the skies in days ahead.
The MPOB end-March output, stock and export figures received a lukewarm response from traders. (see chart below)
From March 10 peak of RM2,910 to April 8 decline-low of RM2,573, the market lost a hefty RM330 per tonne. Bullish market sentiment was grossly dampened as earlier bullish hedgers and traders unloaded their long-positions along with fresh speculative and hedge selling that added bearish fuel to the largely overbought market. There were only two mild upward corrections or adjustments during the sell-off and they fizzled out as fast as they started.
An interesting point to note was that during the price decline, the market’s backwardation narrowed significantly. As at Thursday’s close the spot-May futures commanded a RM33 premium over the nearby-June futures price and a RM50 premium over the forward July futures. The spot-May premium over the far forward August and September futures were at RM60 and RM65 respectively. The narrowing of the backwardation-premiums gives rise to ideas that the nearby supply-tightness or squeeze may be temporary over.
BMD CPO JULY FUTURES- DAILY
AFTER A MASSIVE PRICE DECLINE, MARKETS USUALLY WOULD TURN AROUND WHEN YOU LEAST EXPECTED IT TO HAPPEN – THAT IS GUARANTEED!
As at Thursday’s close, the daily GM Teoh Trend-Tracker signals remained neutral-to-slightly negative after having triggered the buy-signal on April 14th. (see chart).
We are likely to witness is some range-trading around the RM2,700-RM2,640 levels in sessions ahead. A successful break above these overhead price barriers would set the course for another leg of upward momentum.
If you put a pistol on my head and ask where prices would be headed then, I would simply say RM2,750-RM2,780 for the immediate term.
MPOB End-March Stock, Output & Price
Kindly be inform that my next Master Trader Tutorial (Palm Oil) would be held in Singapore on 3-4 October, 2014 and in Jakarta in early-November 2014. Further information and registration can be obtain for our web.