Malaysian crude palm oil futures rose to a 6-week high on Monday, as traders continued to bet on tight global edible oil supplies with no sign of the drought easing in the soya-producing US Midwest. US new-crop soyabeans hit a contract high on Monday after farm newsletter Pro Farmer estimated US soyabean production would be worse than forecasts by the US Department of Agriculture.
A smaller supply of soyabeans to be crushed into soyabean oil had widened palm oil's discount to soyabean oil to above $250 per tonne, shifting more demand to the cheaper tropical oil. "There's a lot more upside for crude palm oil prices because so far palm oil has been lagging behind soyabean oil," said James Ratnam, an analyst with TA Securities in Malaysia. "The second thing is that there could be new stimulus measures coming out from China and the US that could boost sentiment."
The benchmark November 2012 contract on the Bursa Malaysia Derivatives Exchange gained 0.7 percent to close at 3,091 ringgit ($994) per tonne after touching an intraday high at 3,122 ringgit, a level last seen since July 17. Total traded volumes stood at 25,999 lots of 25 tonnes each, just slightly higher than the usual 25,000 lots. Palm oil will consolidate further in the range of 3,044-3,097 ringgit per tonne before climbing up towards 3,183 ringgit, Reuters market analyst Wang Tao said.
Demand appears to be picking up with Malaysia's exports rising 5.7 percent for the August 1-25 period from a month ago, cargo surveyor Intertek Testing Services said on Saturday. Traders will be watching for further indications on export trends as another cargo surveyor, Societe Generale de Surveillance, releases its August 1-20 data together with August 1-25 data later in the day.
Refiners in Malaysia's top oil palm growing state of Sabah will pay millers less for edible oil from next month to preserve margins and better compete with Indonesia, the Business Times reported on Monday, in a move likely to hit planters' revenues. Planters are also concerned by a possible return of El Nino to South East Asia as the hot and dry weather pattern can deal serious damage to palm oil production in Indonesia and Malaysia.
Other vegetable oil markets also traded higher on an oilseed supply squeeze due to the US dry weather. By 1005 GMT, the most active US soyaoil contract for December delivery gained 1 percent and the most active January 2013 soyaoil contract on the Dalian Commodity Exchange rose 1.4 percent.
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