(Businessweek) – Palm oil rallied to the highest level in eight months on speculation that wet weather will disrupt harvests in Malaysia, keeping stockpiles in the second-largest producer below levels a year ago.
The contract for delivery in January advanced 1.4 percent to 2,497 ringgit ($794) a metric ton on the Bursa Malaysia Derivatives, the highest close for futures since Feb. 22. Palm for physical delivery in November was at 2,475 ringgit, data compiled by Bloomberg show.
Isolated showers and thunderstorms are predicted over Sabah, Sarawak and Johor, the biggest palm oil producing states, according to a seven-day outlook on the Malaysian Meteorological Department’s website. While palm oil is produced year-round, output peaks from July to October. The monsoon in Malaysia usually begins in November.
“The wet season would result in lower harvests, but it is past the peak production cycle anyway,” said Arhnue Tan, an analyst at Alliance Investment Bank Bhd.
Output gained 10 percent to 1.91 million tons in September from a month earlier, while stockpiles climbed 7 percent to 1.78 million tons, according to the Malaysian Palm Oil Board. Inventories are 28 percent below a year ago.
Traders are concerned that the weather could reduce output and extraction rates, said Paramalingam Supramaniam, director at brokerage Pelindung Bestari Sdn. in Selangor.
“The production is not increasing with the expected speed and the stocks are much lower than what they were last year at this time,” said Sandeep Bajoria, chief executive officer of Mumbai-based broker Sunvin Group.
Refined palm oil for May delivery gained 0.3 percent to close at 6,104 yuan ($1,002) a ton on the Dalian Commodity Exchange and soybean oil fell 1 percent to end at 7,056 yuan.
Soybeans for delivery in January climbed 0.2 percent to $12.7075 a bushel on the Chicago Board of Trade, while soybean oil for December gained 0.6 percent to 40.60 cents a pound.
