Malaysian palm oil futures rose more than 1 percent before partly reversing gains on Monday, with sentiment driven by comparative vegetable oils, although many investors expected downward price pressure in the coming months. "The market is holding firm on the back of Friday's CBOT (price)," said a palm oil trader in Kuala Lumpur. He added that a range of around 3,250 to 3,350 could be expected throughout the next few days' trading session.
Benchmark June crude palm oil contract on the Bursa Malaysia Derivatives gained 0.6 percent to 3,282 ringgit ($1,084.260) per tonne after earlier hitting a high at 3,305 ringgit. Palm oil, used in products such as food, cosmetics, tyres and biofuels, shed 5.4 percent last week as prices were pressured by talk of double-digit output growth in March early in the week.
On February 10, prices touched 3,967 ringgit, a peak not seen since March 2008 on concerns that seasonally heavy rains have stalled harvesting in top producers Indonesia and Malaysia. Palm oil, however, is moving into a higher production cycle, which many analysts say could put downward pressure on prices in coming months. "The fairly common view is that going into a higher production period, that there is expectation for some softness over the next year," said one analyst.
Traded volume on the benchmark stood at 19,805 lots of 25 tonnes each, above the usual 15,000 lots. Late on Friday, cargo surveyor Societe Generale de Surveillance showed palm oil exports during the same period fell 0.3 percent. Societe Generale de Surveillance and fellow cargo surveyor Intertek Testing Services are due to issue Malaysia's March exports on Thursday.
"We saw from last month's numbers, that it was certainly bearish as far as prices went," the analyst added. "If we get another situation where demand is pretty horrific like last month, you could say supply is no longer tight." Other vegetable oils were mixed as crude oil retreated in Asian hours with Brent slipping below $115 after Libyan rebels regained control of key oil towns, and unrest over the weekend was limited to minor crude exporters Syria and Yemen.
US soyoil for May delivery barely moved, while the most-active September 2011 soyoil on the Dalian Commodity Exchange traded inched down. "Trading in China soyoil is slow these days as traders are cautious ahead of the USDA report, expecting the data to set market trends," said an oil analyst with a Shanghai brokerage.
The US government will unveil on Thursday its first survey-based estimates for major crop seedings in the United States this year, providing policymakers fodder for their battle against food inflation. Two previous non-survey acreage estimates from the USDA, both in February, had identical estimates for corn and soy - 92 million acres and 78 million acres, respectively.