Malaysian crude palm oil futures edged up on Monday as weather concerns in top oilseed producing regions trumped renewed worries about the eurozone debt crisis and investor caution ahead of key industry data. Traders are looking at prospects of dry weather in South America hurting soy yields and heavy Southeast Asian rains disrupting palm oil production.
But gains were limited by the poor eurozone retail sales and unemployment data, raising fears of a slowdown in growth and commodity demand. "Until more is known about demand, weather in South America and most importantly the USDA and MPOB figures, the market will remain in the 3,160-3,240 ringgit range," said a trader with a local commodities brokerage in Kuala Lumpur, referring to the US Department of Agriculture and the Malaysian Palm Oil Board.
Benchmark March palm oil futures on the Bursa Malaysia Derivatives Exchange gained 0.1 percent to close at 3,215 ringgit ($1,000) per tonne. Traded volumes stood at 15,947 lots of 25 tonnes each, thinner than the usual 25,000 lots. Palm oil faces support at 3,176 ringgit per tonne according to technical charts, said Reuters market analyst Wang Tao.
The USDA will issue January world crop reports on Thursday which traders expect to show downgrades of South American crop forecasts. The industry is also expecting lower production figures from the MPOB December data, which is due on Tuesday. The Malaysian Meteorological Department issued heavy rain warnings for parts of Pahang and Sarawak, key producing states that account for almost 30 percent of national palm oil output. While there have not been any reports of floods disrupting production in No 2 producer Malaysia, the market is watching the weather closely as any severe drop in production will add pressure to tightening stocks.
Traders are also keeping an eye on export trends as moderating exports will help ease the pressure. Cargo surveyors Societe Generale de Surveillance and Intertek Testing Services will issue January 1-10 Malaysian palm oil exports data on Tuesday. Crude palm oil output in Indonesia, the world's largest producer of the edible oil, is expected to rise to 25.7 million tonnes this year, the agriculture ministry said on Monday. The ministry earlier said output for last year stood at 22.5 million tonnes. It also reported a 5 percent drop in palm oil exports to 19.4 million tonnes last year, highlighting rising domestic consumption and downstream investment.
In other oil markets, Brent crude prices firmed on Monday, trading above $113 a barrel, lifted by Iran's threat to shut a key oil-shipping route although worries over the economic health of the eurozone kept gains in check. US soyoil for January delivery gained 1.1 percent, lifted by weather concerns in Argentina while the most active September 2012 soyoil contract on China's Dalian commodity exchange was almost flat.