"Palm oil is stuck," said a trader with a commodities brokerage in Kuala Lumpur. "It is undervalued as biodiesel demand has kicked in because of the high margins, but it also cannot go higher because of high stocks." The benchmark February contract on the Bursa Malaysia Derivatives Exchange settled up 0.04 percent to 2,296 ringgit ($750) per tonne in see-saw trade. The contract recorded a decline of about 3 percent for the week, its third straight weekly loss and the steepest fall since November 11.
Total traded volumes stood at 34,886 lots of 25 tonnes each, compared to the usual 25,000 lots. Malaysian palm oil stocks probably hit a record 2.58 million tonnes in November, a Reuters survey showed ahead of official data on Monday, helping the tropical oil widen its discount to competing Argentine soyaoil to $360 per tonne. The discount remains unsustainable and will narrow as more demand shifts to palm oil in the next few months, especially with wet weather delaying soya plantings and curbing yields in the world's biggest soyaoil exporter Argentina.
Traders are watching for cargo surveyor data on Malaysia's December 1-10 palm oil exports on Monday to confirm strong demand as No 2 edible oil buyer China stocks up before stricter quality controls on the refined grades come into effect on January 1. In addition, export data may be even stronger as Malaysian planters scramble to exhaust an annual tax-free export quota totalling 3.5 million tonnes that is set to expire at the end of December.
Malaysia's Commodities Ministry will hold a briefing for refiners on Monday to get feedback on the government's plan to cut crude palm oil export taxes and completely dismantle the tax free export quota for the grade, traders said. Some planters are asking for the quota to continue until stocks fall below 2 million tonnes. In palm oil's competing markets, US soyaoil for December delivery edged up 0.2 percent in Asian trade. The most active May 2013 soyabean oil contract on the Dalian Commodity Exchange ended almost flat.