KUALA LUMPUR: Malaysian palm oil futures rose to a near two-week high on Monday, as higher prices of competing soyoil could kick in demand for the tropical oil at time when its production is on the rise.
Soyoil has rallied since last week after the US Department of Agriculture (USDA) issued a report showing tighter-than-usual soybean stocks despite a high planting forecast, which has widened its premium to palm oil.
“Although we are expecting a seasonal pick-up in production as we enter into Q2, the prospective insufficient soybean plantings in 2011 should keep prices of soyoil high and provide support to crude palm oil,” said Citi analyst Penny Yaw.
Benchmark June 2011 on the Bursa Malaysia Derivatives Exchange settled up 1.3 percent at 3,382 ringgit ($1,117) a tonne after going as high as 3,392 ringgit -- a level unseen since March 22. Overall trade volume stood at 14,607 lots at 25 tonnes each compared to the usual 15,00 lots.
Benchmark prices fell 12 percent in the first quarter, having tracked other commodities lower as unrest in the Middle East and an earthquake in Japan sent investors scrambling for perceived safe-haven assets. In the physical market last week, Malaysian refined palm olein widened its discount to competing Argentine soyoil to $70 per tonne, from trading at a premium at the start of the this year and end 2010.
“Buyers will shift their preference to palm oil as its discount widens and we may see a reverse in demand patterns,” said a trader with a foreign commodities brokerage. “Higher production for palm oil will also help pressure prices.” Malaysia’s palm oil exports have progressively fallen since December as erratic weather and floods pushed prices above competing soyoil.
source - www.dailymirror.lk
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