(Businessweek) – Palm oil advanced as output in Malaysia, the largest producer after Indonesia, probably expanded more slowly than a year earlier in July, keeping inventories at the lowest level in more than two years.
The contract for October delivery climbed 0.3 percent to 2,246 ringgit ($692) a metric ton on the Bursa Malaysia Derivatives. Palm oil for local physical delivery in August was at 2,310 ringgit today, data compiled by Bloomberg show. The exchange will be closed from the second half of tomorrow and on Aug. 8 and 9 for the Eid festival.
Output expanded 10 percent to 1.56 million tons in July from a month earlier, according to the median of estimates from two plantation companies and three analysts compiled by Bloomberg. Production jumped 15 percent from a month earlier in 2012. Reserves held at 1.65 million tons, matching inventories in June, the lowest since March 2011, the survey showed. Exports gained 2.7 percent to 1.45 million tons.
“There is an expectation that output will be lower than last year because we had a bumper harvest in the second half of the year,” said Arhnue Tan, an analyst at Alliance Investment Bank Bhd. in Kuala Lumpur. “Weaker production should keep stockpiles from rising too quickly. It should keep stocks below 2 million tons for the next few months.”
A weaker currency also supported the market as it made ringgit-denominated contracts more attractive, which may lead to an increase in purchases from price-sensitive countries like India or Pakistan in the near term, Tan said. The ringgit fell 2.6 percent last month, the most since May 2012.
Soybean oil for delivery in December fell 0.4 percent to 43.02 cents a pound on the Chicago Board of Trade. Soybeans for November declined 0.3 percent to $11.7975 a bushel. Refined palm oil for January delivery fell 0.4 percent to close at 5,422 yuan ($886) a ton on the Dalian Commodity Exchange. Soybean oil gained 0.2 percent to end at 7,008 yuan a ton.
