Palm oil makes weak start to 2015

(Agrimoney) – New months are typically meant to bring fresh cash into many market.

Indeed, many use this as an explanation for the so-called “January effect”, the idea that share markets in particular perform unusually strongly during the first month of the year.

Friday brought little to dispel that notion.

While Tokyo and mainland Chinese markets were not open, Sydney stocks gained 0.5%, Seoul shares 0.3% and Hong Kong shares were trading 1.1% higher.

Dollar muscle

In not such a positive sign for many commodities, the dollar rose too, hitting a fresh nine-year high against a basket of currencies.

A stronger dollar undermines prices of dollar-denominated commodities by making them less affordable to buyers in other currencies.

Indeed, Brent crude gave back early gains to stand 0.1% lower at $57.28 a barrel as of 08:25 UK time (02:25 Chicago time), hardly a positive sign for ags, many of which are used in making biofuels.

The big Chicago grains and New York softs contracts will start trading later in the day.

‘Very short term impact’

And palm oil, of which a major use is in making biodiesel, fell 1.2% to 2,238 ringgit a tonne on its first trading day of 2015, having already recorded a drop of 14.8% over 2014.

No January effect here. Friday’s drop was viewed as being down to early-year profit-taking, after a late-2014 rally on fears for the impact of Malaysian flooding on output of the vegetable oil from the second-ranked producer, and exporter, of the vegetable oil.

Malaysia’s plantations minister, Douglas Uggah Embas, said last week that the country’s palm oil output could drop by 15-30% for December, bigger than the typical seasonal drop of about 10%.

However, RHB Research cautioned over ideas of a rally in palm oil prices, saying that “we expect the current flood hitting West Malaysia to have a very short term impact on palm oil production.

“Upside is limited by falling energy prices,” RHB added.

Malaysian exports

Cargo surveyor Intertek said that Malaysian palm oil exports fell 0.9% last month, from November, to 1.31m tonnes.

However, that was not such a surprise, given that rival Societe Generale de Surveillance on Wednesday came in with exactly the same figure for the December decline.

Furthermore, Intertek had put the rate of decline, as of December 25, at 2.3%, implying some pick-up, compared with 2013, during the last week of last month.