Palm Oil Jumps to 17-Month High as Dry Spell Threatens Output
Category: Oilseeds
(Bloomberg) – Palm oil climbed to the highest level since September 2012 on concern that a prolonged dry spell in Malaysia and Indonesia, the biggest growers, may reduce supplies of the world’s most-used cooking oil.
The contract for May delivery advanced 0.7 percent to 2,888 ringgit ($886) a metric ton on Bursa Malaysia Derivatives, the highest level at close for a most-active contract since September 2012. Futures rose 3.1 percent this week, posting a fifth weekly advance, the longest run since June.
The palm oil belt in Malaysia and Indonesia is threatened by dryness in the next two weeks due to moisture stress, the Commodity Weather Group said in a report yesterday. The region, which has a chance of normal showers in 11-15 days, will likely return to a drier weather pattern that may threaten yield potential, it said. Futures may approach 3,500 ringgit should El Nino hurt production from late 2014, according to Dorab Mistry, director at Godrej International Ltd.
“The weather concerns continue and palm oil production is expected to decline in March, bringing down inventories,” said Donny Khor, the deputy director of futures and commodities at RHB Investment Bank Bhd., by phone from Kuala Lumpur. “Investors are also taking advantage of the run up in soybean oil prices.”
Soybean oil entered a bull market yesterday, settling at 44.49 cents a pound on the Chicago Board of Trade, up 20 percent from the Jan. 27 closing low of 37.06 cents. The contract for delivery in May advanced 0.4 percent to 44.67 cents today, while soybeans climbed 1.4 percent to $14.5775 a bushel, set for a thirdly weekly gain.
As much as 15 percent of the soybean crop yet to be harvested in central Brazil may be damaged by as much as 5 inches (13 centimeters) of rain through early next week, Commodity Weather Group said in the report.
Refined palm oil for September delivery gained 1.4 percent to end at 6,444 yuan ($1,052) a ton on the Dalian Commodity Exchange. Soybean oil rose 1.3 percent to close at 7,198 yuan.
