Palm Oil Bounces From 5-Week Lows

PALM oil rose yesterday, trimming a weekly decline, on concern that dry weather caused by an El Nino may curb supply in Malaysia.

The
contract for delivery in June advanced as much as 1.8 per cent to
RM2,580 a metric ton on the Malaysia Derivatives Exchange, and closed at
RM2,577. The price ended last week at RM2,649.

Palm oil output
in Malaysia, the second-largest producer, may decline between 2 and 3
per cent this year, as El Nino cuts yields, said Boon Weng Siew,
president of the Malaysian Estate Owners Association, which represents
small and medium-sized growers. The nation produced 17.6 million tons
last year.

“That’s the first reason,” Joelianto, head of trading at Jakarta-based
PT Sinar Mas Agro Resources and Technology, said by phone yesterday.
Prices also gained as investors covered bets on declines, he said.

Dry
weather was forecast to persist in Sabah, Malaysia’s largest
palm-oil-producing region, and other parts of the country through to
May, the Meteorological Department said on March 12.

The state
accounted for 35 per cent of Malaysia’s output in the first two months
of the year, according to data from the country’s Palm Oil Board.

El
Nino, which reduces rainfall in Asia, may cause Malaysia to miss a
government output forecast for palm oil of 18.1 million tons, Dorab
Mistry, a director at Godrej International Ltd, one of India’s biggest
vegetable oil buyers, said March 9. Output this year may be 17.2 million
tons, Mistry said.

Prices may rise to as much as RM3,300 in the
first half of the year amid the drop in supply, Anne Frick, vice
president for research at Prudential Bache Commodities LLC, said on
March 8.

The commodity may touch RM3,200 in the second half,
Mistry said the following day.

Still, producers in Indonesia and
Malaysia tracked by OCBC Investment Research Pte Ltd may post higher
output this month as the dry weather’s impact on yields won’t be felt
until six months later, Carey Wong, an analyst at the bank, said by
phone today. Wong didn’t identify producers.

Source : Business Times

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