FCPO: Bulls Turned Down South 1st July 2014

Tuesday, 1st July 2014. Palm oil futures retrace for another session yesterday amid lack luster increment in export figures, other news to follow.

"-U.S. stocks ended June and the second quarter higher, even as the broader market closed marginally lower on Monday.

The S&P 500 recorded the fifth consecutive month of gains and the biggest second-quarter gain since 2009. The benchmark index SPX -0.04%  closed less than a point lower at 1,960.19, gaining 3.9% over the month and 5% over the quarter. The Dow Jones Industrial Average DJIA -0.15%  shed 25.24 points, or 0.2%, to 16,825.96, but gained 1.9% over the past month and 2.2% over the past quarter. The Nasdaq Composite COMP +0.23%  defied the trend and ended the day 10.25 points, or 0.2%, higher at 4,408.18. The tech-heavy index gained 3.9% in June and 5% over the past quarter. "

"-Mistry Sees Palm Rallying Less on El Nino Delay, Biofuel
By Ranjeetha Pakiam and Swansy Afonso  Jun 27, 2014 1:26 PM GMT+0800
Palm oil, the most-used cooking oil, may rally less than an earlier forecast as demand for biodiesel trails estimates and an El Nino starts later than expected, said Dorab Mistry, director at Godrej International Ltd.
Futures may climb to 2,800 ringgit ($873) a metric ton by December if the weather event occurs from mid-August, Mistry said, scaling back his March 5 forecast for a run-up to as much as 3,500 ringgit. Palm may trade between 2,300 ringgit and 2,500 ringgit in the next few weeks, temporarily reaching 2,600 ringgit if a dry period in Southeast Asia extends beyond the next two weeks, he said at a conference in Mumbai.
Prices in Kuala Lumpur have retreated from an 18-month high in March as rising output from Indonesia and Malaysia, the largest producers, add to record global cooking oil supplies. The failure of Indonesia and Malaysia to absorb additional quantities of biodiesel has disappointed palm oil prices, Mistry said yesterday. Cheaper palm may help extend a decline in global food costs amid forecasts for the El Nino that often roils global agriculture markets. “Production of palm oil has been better than expected since February,” Mistry said, according to prepared remarks. “If the El Nino turns out to be mild and delayed, as many weathermen are predicting of late, palm oil production will turn out to be better than my earlier estimates.”

Biggest Producers
Indonesia may produce 30.5 million tons or more this year while Malaysia’s output will total 19.7 million to 19.9 million tons, more than the March forecast of as much as 19.7 million tons, said Mistry, who’s traded vegetable oils for more than three decades. The two Southeast Asian producers together account for about 86 percent of world supplies.
Futures traded 1.1 percent lower at 2,444 ringgit a ton by midday break on the Bursa Malaysia Derivatives today. Prices jumped to 2,916 ringgit on March 11, the highest level since September 2012. Mistry, who in November correctly forecast palm oil would trade from 2,600 ringgit to 2,900 ringgit through March, said his price outlook is based on the assumption that Brent crude oil trades in a range of $100-$120 a barrel. “Prices will depend very much on the development and the severity of El Nino in the medium term,” Mistry said. “Palm has become far too dependent on biodiesel demand and that is an unreliable, opportunistic and sporadic market.”

El Nino Alert
A moderate El Nino would reduce output by as much as 12 percent in Malaysia, according to IOI Corp. (IOI) An event as severe as the one in 1997-1998 may cut production by as much as 15 percent, Chief Executive Officer Lee Yeow Chor estimates. Goldman Sachs Group Inc. says disruptions associated with El Ninos have been most important for palm oil, coffee and sugar.
The event, caused by the periodic warming of the tropical Pacific, brings drought to the Asia-Pacific region and heavier-than-usual rains to South America. Australia remains on El Nino alert even as a slowing in Pacific Ocean warming may push back its onset to September, the Bureau of Meteorology said June 17.
There’s a 60 percent chance that an El Nino will set in by the end of August, the World Meteorological Organization said yesterday. The probability of the phenomenon becoming established by the end of December rises to as high as 80 percent, the United Nations agency said in a statement.

‘Hot Spots’
“El Nino may be delayed, but we’re already experiencing dry weather,” said Alvin Tai, an analyst at RHB Investment Bank Bhd. in Kuala Lumpur, who’s covered the plantations industry for 10 years. “We are already seeing hot spots developing in Sumatra and West Malaysia, so that means rain has not been sufficient,” possibly hurting production later, he said. The southwest monsoon, which started on May 15 and may last until September, will generally be a dry season for Malaysia, according to the Malaysian Meteorological Department.  Palm’s rally in March, caused by a dry period in Southeast Asia in February, reduced its appeal as a feedstock for biodiesel and discouraged its use in Indonesia, Mistry said. The country’s use of palm biodiesel in the first five months of this year is roughly the same as in the same period a year earlier, and full-year consumption will not increase, he said. “We are told this is due to a lack of infrastructure for blending and handling,” said Mistry. “While this may be one reason, the real reason could be the high price of CPO and the lack of competitiveness of biodiesel in 2014.”  Global food costs dropped 1.2 percent last month and are 3.2 percent lower than a year ago, according to a gauge of 55 food items tracked by the Rome-based Food & Agriculture Organization.



FCPO- It Is Hammer Time

Short term trend has turned to Bearish this week as the benchmark Sept crossed down below previous support trend line and never attempt to recover. Remember I mentioned previously the support trend line at 2,470 will serve as first defense line for the Bulls to survive, well now the defense line have broken. Never-mind other indication you can see on the market, the benchmark Sept is likely heading down further judging from yesterday price action. Lower high and lower low have formed on hourly chart. With these Bearish candle formation formed, traders are likely to expect negative price action throughout this week. I am also aware that there are palm oil analyst that predicts the price would go to 2,800 ish by December. It will serve as a good entertainment read on those headlines. Junior or seasoned analyst can come with price numbers anyway they can come up with, but that was a long shot. And I do not have any expectation for long shot nor I would use it to trade. One thing I am grateful to have analyst would be forth telling their weather expectation in the future, that is all I got use for them. Back to the technical reading, we are likely looking at more weakness if the benchmark Sept manage to breach below 2,420 level today. It is very likely judging on overnight Soy oil futures that closed at 39.05 level as the time of writing this morning. Soy oil 0.95 cents is substantial enough to force palm oil futures to open at least 15 points lower. With this Bearish expectation of opening, long holders have to beware that the worst is only beginning, market can trade even lower this week. With Bearish soy oil futures, psychological support at 2,400 would be easily taken out today and there is no telling how low for the Sept contract would go, 2,380 would be my first stop for the moment. For today, pivot support for Sept contract is located around 2,409 while resistance is pegged at 2,437.

Daily Pivot Point
R2= 2449
R1= 2437
S1= 2417
S2= 2409
 Disclaimer: Information and opinions contained in this report are for educational purposes only. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness.