Palm Oil Gains to One-Month High on U.S. Soybean Crop Concerns

(Businessweek) – Palm oil climbed to a one-month high on concern that hot, dry weather in the U.S. may curb soybean yields, reducing global cooking-oil supplies.

The September-delivery contract advanced as much as 1.7 percent to 3,070 ringgit ($970) a metric ton on the Malaysia Derivatives Exchange, the highest price for the most-active contract since June 1, and was at 3,065 ringgit at 4:01 p.m. in Kuala Lumpur. Futures climbed 2.3 percent last week, trimming the quarterly decline to 12 percent, the biggest loss since the three months ended March 2011.

Soybeans have gained 19 percent this year as the drought sapped soil moisture in the Midwest, the largest U.S. growing region, after similar weather conditions cut harvests in Brazil and Argentina. Farmers may sow 76.08 million acres, up from 74.976 million last year and more than the 73.902 million they had intended to plant in March, as rising prices and dry weather led to more of the oilseed getting planted on winter-wheat fields, the U.S. Department of Agriculture said June 29.

“The higher planting acreage may not lead to a bigger harvest as the current dryness and heat in the key U.S. planting regions for corn and soybeans are threatening to reduce yields,” Ivy Ng, an analyst with CIMB Group Holdings Bhd., wrote in a report today. “The U.S. soybean crop rating is at its lowest level in many years and a smaller soybean harvest would help crude palm oil price prospects.”

Crop Ratings

Approximately 53 percent of soybeans earned top ratings as of June 24, down from 56 percent last week and 65 percent a year earlier, the USDA said June 25. Goldman Sachs raised its three- month to 12-month price forecast for soybeans to $15.50 per bushel from $14.30, the bank said in a report dated June 29.

Soybeans for November delivery gained 0.9 percent to $14.40 a bushel on the Chicago Board of Trade. December-delivery soybean oil rose 0.2 percent to 53.21 cents per pound. Palm oil and soybean oil are used in foods and fuels.

Malaysia’s palm oil exports rose 4.9 percent to 1.45 million tons in June from a month earlier, surveyor Intertek said on June 30.

Palm oil for January delivery rose 0.4 percent to close at 8,096 yuan ($1,275) a ton on the Dalian Commodity Exchange. Soybean oil for delivery in the same month climbed 0.9 percent to end at 9,632 yuan a ton.

To contact the reporter on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net

To contact the editor responsible for this story: Jake Lloyd-Smith at jlloydsmith@bloomberg.net