Palm oil headed for the first annual advance in three years as demand increases for the vegetable oil used in everything from noodles to biofuel amid a drop in production in Indonesia, the world’s biggest supplier.
The contract for March delivery climbed 0.2 percent to 2,635 ringgit ($802) a metric ton on the Bursa Malaysia Derivatives by midday break, extending gains to 8 percent this year, the first annual gain since 2010.
Palm entered a bull market in November as output fell at plantations in Indonesia and biodiesel demand increased. Prices may advance to 3,000 ringgit by March as demand climbs, according to Dorab Mistry, director at Godrej International Ltd. Indonesian output will decline by 500,000 tons to 27.5 million tons this year, before rebounding to 30.5 million tons in 2014, said Mistry. That would be the first drop since 1998, according to data from the U.S. Department of Agriculture.
“Demand for palm oil has been higher in food as well as fuel this year,” said Prathamesh Mallya, an analyst at AnandRathi Commodities Ltd. in Mumbai. “Production will be lower in Malaysia in 2014 on rains, which will drive prices higher.”
Exports from Malaysia, the world’s second-biggest producer, fell 1.1 percent to 1.43 million tons this month from November, Intertek said today.
Soybean oil for March delivery was little changed at 38.95 cents a pound on the Chicago Board of Trade. Soybeans were at $13.0850 a bushel from $13.0875 yesterday.
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