Palm oil advanced to the highest level in more than 17 months on speculation that inventories may decrease in Malaysia, the largest supplier after Indonesia, as output declines for a fourth month.
The contract for May delivery climbed as much as 2.2 per cent to RM2,795 (US$854) a metric tonne on the Bursa Malaysia Derivatives, the highest level for the most-active contract since September 2012, and was at RM2,793 at 5:11pm in Kuala Lumpur. Futures are set for an 9.2 per cent gain this month.
Production in Malaysia dropped about nine per cent in the first 20 days of the month from the same period in January, said Paramalingam Supramaniam, a director at Pelindung Bestari Sdn. Bhd, a Selangor-based broker, citing estimates from the Malaysian Palm Oil Association. Output fell to 1.51 million tonnes last month and reserves shrank to 1.93 million tonnes, Malaysian Palm Oil Board data show. The harvest is the lowest in January and February because of growing cycles.
“Lower inventories of between 1.7 million to 1.8 million tonnes are expected due to the lower production this month,” said Arhnue Tan, an analyst at Alliance Investment Bank Bhd in Kuala Lumpur. “The cut to soybean crop estimates may increase dependency on palm oil, keeping stockpiles low.”
Output of soybeans, crushed to make an alternative oil, will be 4.4 per cent less than earlier expected in South America after dry weather hurt crops in Brazil, according to Oil World.
Prices rose on speculation that an El Nino weather pattern can occur later this year, impacting palm oil production, said Hiro Chai, vice president at CIMB Futures Sdn Bhd in Kuala Lumpur. The El Nino, which can parch Australia and parts of Asia while bringing rains to South America, may occur in the coming months, Australia’s Bureau of Meteorology said yesterday.
Soybean oil for May delivery gained 1.2 per cent to 41.34 cents a pound on the Chicago Board of Trade, while soybean futures lost 0.2 per cent to US$13.84 a bushel after reaching US$13.885 yesterday, the highest since September 13.
Refined palm oil for September delivery gained 0.5 percent to close at 6,240 yuan (US$1,019) a tonne on the Dalian Commodity Exchange. Soybean oil ended little changed at 6,834 yuan.– Bloomberg
Source : New Straits Times