Palm oil traded near a 17-month high on speculation that dry weather in Southeast Asia may hurt production of the world’s most-used cooking oil.
The contract for May delivery climbed as much as two per cent to RM2,858 (US$873) a metric tonne on the Bursa Malaysia Derivatives and ended the morning session at RM2,847. Futures reached RM2,860 on March 3, the highest level since September 2012.
Palm-oil yields may suffer later in 2014 and in the next two seasons after unusual dryness in some Malaysian, Thai and Indonesian growing areas in the last two months, Oil World, a Hamburg-based researcher, said yesterday. Another two to three weeks of dryness in Malaysia will increase stress on oil palms, potentially reducing the weight of fruit bunches, it said.
“Prices could surge above RM3,000 to hit RM3,200 by end-June if the dry season extends beyond March,” said Alan Lim Seong Chun, an analyst at Kenanga Investment Bank Bhd, said in a report today. “CPO production would come in substantially lower, below current market expectation, and cause inventory to be depleted significantly to a seven-year low level of 1.25 million tonnes by June.”
A potential El Nino weather pattern and bullish soybean prices are positive for palm oil, Alvin Tai, an analyst at RHB Investment Bank Bhd., said in a report today.
World soybean production will be less than predicted a week ago as excessive rainfall as well as heat and drought add to crop losses in Brazil and Paraguay, Oil World said. Output will total 278.8 million tonnes in the 2013-2014 season, down from 280 million tonnes estimated a week before, it said.
Soybeans for delivery in May was little changed at US$14.245 a bushel on the Chicago Board of Trade, after climbing one per cent yesterday. Soybean oil was little changed at 43.74 cents a pound, after surging 3.1 per cent yesterday.
Refined palm oil for September delivery rose one per cent to 6,308 yuan (US$1,028) a ton on the Dalian Commodity Exchange. Soybean oil advanced 1.5 per cent to 7,024 yuan.– Bloomberg
Source : New Straits Times