CPO On MCX Settled Down

CPO on MCX settled down -1.73% at 517.5 as downward pressure build from May as output picks up in Indonesia and Malaysia. Global palm oil production is forecast to increase by 6 million tonnes in 2017. A rebound in palm oil production this year is forecast to drag down prices of the tropical product in the second half, with additional pressure coming from an expected slowdown in demand from top importers India and China.

Tight supplies following a drought in 2015-16 are expected to support the market over the next two months, but downward pressure should build from May as output picks up in Indonesia and Malaysia. Earlier this week Benchmark Bursa Malaysia crude palm oil futures fell to their lowest since early November last week on slowing demand and the outlook for higher production. On Wednesday, the main contract slid a second day to hit a low of RM2,821 (US$634.40) a tonne.

Meanwhile Leading industry analyst Dorab Mistry has outlined three possible scenarios for crude palm oil (CPO) prices this year, and placed his bet on prices hovering in the region of RM3,000 per tonne until the fourth quarter of this year. This, he said, was based on the “bullish scenario” that was based on the impact of weather conditions, and the possibility of another El Nino developing in South-East Asia by June this year.

The first scenario, which called the “normal scenario” was based on supply and demand. Stocks are still very tight, the inverse has been eroded and palm has once again become competitive. Technically now CPO is getting support at 514.2 and below same could see a test of 510.8 level, And resistance is now likely to be seen at 522.4, a move above could see prices testing 527.2.

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