CPO on MCX settled up 0.34% at 537 on short covering recovered from the day's low as support seen after the update that Indonesia’s crude palm oil output likely dropped in February, extending the decline into a third straight month. CPO production in the world’s top producer of the widely used oil likely slipped to 2.80 million tonnes in February from 2.95 million tonnes in January, according to the median estimate in a survey of two industry associations and a state palm research firm. Meanwhile, exports of Indonesian CPO were estimated to have risen last month to 2.41 million tonnes from 2.21 million tonnes in January. Indonesian Palm Oil Association (GAPKI) data showed the country exported 2.72 million tonnes of palm oil and palm kernel oil in January. Benchmark palm oil futures for June delivery on the Bursa Malaysia Derivatives Exchange closed up 0.7 per cent at 2,829 ringgit ($639) a tonne. Earlier in the session, they hit 2,839 ringgit a tonne, their highest since March 9. Traded volumes for the day totalled 40,762 lots of 25 tonnes each. Also supporting palm oil were expectations for a rise in soyoil prices after 2017 US biofuel requirements came into effect. While Palm oil production typically rises in March from February. However, industry players are uncertain about how much production will pick up this month as palm oil trees still face the brunt of a crop-damaging El Nino, which reduces yields of fresh fruit bunches. Technically market is under short covering as market has witnessed drop in open interest by -12.52% to settled at 2306 while prices up 1.8 rupees, now CPO is getting support at 533 and below same could see a test of 529.1 level, And resistance is now likely to be seen at 539.4, a move above could see prices testing 541.9.

Trading Ideas:

# CPO trading range for the day is 529.1-541.9.

# CPO regained above 537 amid an uncertain production outlook and forecasts for a soyoil rally.

# Players are uncertain about how much production will pick up this month as palm oil trees still face the brunt of a crop-damaging El Nino.

# Iran palm oil market is valued at $232.25 million in 2015. Relatively low selling price and usage are expected to drive industry growth.

Crude palm oil prices in spot market dropped by 1.70 rupees and settled at 539.40 rupees.