Palm Holds Below 17-Month High as Dry Weather Threatens Output
Category: Oilseeds
(Bloomberg) – Palm oil gained for a third day to trade near the highest level in 17 months on concern that dry weather may curb output in Malaysia and Indonesia, the world’s biggest producers of the oil used in food and fuel.
The contract for May delivery increased as much as 0.8 percent to 2,829 ringgit ($862) a metric ton on Bursa Malaysia Derivatives and ended the morning session at 2,813 ringgit. Futures reached 2,860 ringgit yesterday, the highest level since September 2012.
Prices posted the biggest monthly increase since October last month as drier-than-usual weather in the main growing regions in Southeast Asia coincided with forecasts that an El Nino may begin later in 2014. Futures are seen supported by the dry weather as delayed impact of a water deficit will curb output, Rizky Hidayat, an analyst with Mandiri Sekuritas PT, said in a report today.
“Production issues because of the dry weather have been pushing up prices,” said Faiyaz Hudani, an associate vice president at Kotak Commodity Services Ltd., by phone from Mumbai. “The prices have gone up too fast and we could see a correction from here.”
The 14-day relative strength index was at 72.4 today, above the 70 level, which signals to those who study charts that prices may be set to reverse.
Prices will be influenced by the potential El Nino and increased biodiesel demand from Indonesia, according to Dorab Mistry, director at Godrej International Ltd. Prices may advance to 3,000 ringgit within eight weeks after the dryness in Indonesia and Malaysia, Sandeep Bajoria, chief executive officer of Mumbai-based Sunvin Group said in an interview yesterday. In the event of an El Nino, prices may reach 3,300 ringgit to 3,500 ringgit by December, he said.
Soybeans for delivery in May climbed 0.2 percent to $14.125 a bushel on the Chicago Board of Trade. Soybean oil rose 0.3 percent to 42.49 cents a pound.
Refined palm oil for September delivery fell 0.5 percent to 6,266 yuan ($1,019) a ton on the Dalian Commodity Exchange. Soybean oil rose 0.4 percent to 6,948 yuan.
