Palm oil climbed to the highest level in more than 17 months on speculation that dry weather in the main palm and soybean growing areas may weaken prospects for global cooking oil production. — Bloomberg photo
PALM oil climbed to the highest level in more than 17 months on speculation that dry weather in the main palm and soybean growing areas may weaken prospects for global cooking oil production.
The contract for May delivery jumped as much as 2.1 per cent to RM2,860 (US$873) a metric tonne on Bursa Malaysia Derivatives, the highest level for futures since Sept 20, 2012, and ended the morning session at RM2,836. Futures increased 9.6 per cent last month, the most since October.
Dry weather may limit Indonesia’s increase in palm oil production in the first half, Martua Sitorus, executive deputy chairman at Wilmar International Ltd, said Feb 21.
The dry weather in Malaysia, which began in early February, may end in the middle or the end of March, according to the nation’s meteorological department.
The two countries account for 86 per cent of global palm oil output, according to the US Agriculture Department.
“Investors have increased their bullish bets on the market driven by weather factors,” said Chee Tat Tan, an analyst with Phillip Futures Pte Ltd, by phone from Singapore.
“The unfavorable weather in Latin America is likely to trim output of competing oils such as soybean oil.”
Global production of soybeans will be smaller than estimated a month ago after prospects deteriorated for harvests in Brazil and Argentina, the International Grains Council said Feb 27.
Farmers worldwide will harvest 284 million tonnes in the 2013/2014 season, 1.4 per cent less than a January estimate of 288 million tonnes, it said.
A surge in crude oil prices amid escalating tension between Ukraine and Russia boosted prospects for palm as biofuel feedstock, Tan said.
West Texas Intermediate crude oil for April delivery rose 1.2 per cent to US$103.80 per barrel on the New York Mercantile Exchange.
“Crude oil prices have gone up because of the Ukraine effect and this may boost palm oil as it would raise biodiesel demand,” Tan said.
Soybeans for delivery in May climbed 0.5 per cent to US$14.2075 a bushel on the Chicago Board of Trade, extending gains of 1.7 per cent on Feb 28. Soybean oil rose 1.1 per cent to 42.26 cents a pound.
Refined palm oil for September delivery advanced 1.5 per cent to 6,306 yuan (US$1,025) a tonne on the Dalian Commodity Exchange. Soybean oil rose 1.6 per cent to 6,928 yuan.