Palm Oil Climbs to 28-Month High on Prospects for Higher Demand

Palm oil advanced for a fourth day to the highest price in more than two years on speculation that the global demand for vegetable oils will surpass demand.

The February-delivery contract rose as much as 1.6 percent to 3,540 ringgit ($1,123) a metric ton before closing at 3,500 ringgit on the Malaysia Derivatives Exchange, the highest price since July 15, 2008. Prices, up 31.4 percent this year, are set for a second annual gain.

Global palm oil demand is growing 7 percent to 11 percent a year, Bayu Krisnamurthi, deputy farm minister in Indonesia, the biggest producer, said today. World stockpiles of vegetable oils will equal 13.2 percent of demand in the 2010-2011 season, a “critically low level,” the Food and Agriculture Organization, or FAO, said in a report last month.

“Exports from Malaysia point to strong demand for palm oil among major importers such as China, the European Union and India,” said Krishna Reddy, an analyst at Way2Wealth Commodities Ltd. in Mumbai. “Increased demand is coming in at a time when concerns about supplies are mounting.”

Malaysia’s exports 19.2 percent to 1.56 million tons in November from the previous month, independent surveyor Societe Generale de Surveillance said this week. Shipments to China and India, the biggest cooking-oil users, jumped 66.3 percent and 72.8 percent respectively, SGS data showed.

Global output of vegetable oils including palm oil, soybean oil, rapeseed oil and sunflower oil will increase 1.5 percent to 174.6 million tons, the FAO forecast. Still, it will lag behind demand, estimated by the United Nations’ agency at 178 million tons, draining inventories.

Lower Output

Palm oil output in Indonesia may be 21.8 million tons this year, less than the 22.5 million tons forecast previously, on lower yields, the China National Grain & Oils Information Center said on Nov. 29, citing OilWorld, an industry publication.

Output in Malaysia, the second-biggest producer, dropped 1 percent to 14.3 million tons in the first 10 months of the year, according to data from the nation’s palm oil board. Production this year may total 17.6 million tons, Plantation Industries and Commodities Minister Bernard Dompok said Nov. 17.

“As concerns about soybean supplies have not eased yet, palm oil will continue its rally,” Reddy said. Palm oil may climb to 3,800 ringgit in the next one month, he said.

January-delivery soybean oil lost as much as 0.7 percent to 52.27 cents a pound in after-hours trading on the Chicago Board of Trade. Prices climbed 3.2 percent yesterday, the most in two weeks. Soybeans for January delivery shed as much as 0.7 percent to $12.7375 a bushel after advancing 3.2 percent yesterday, the most since Nov. 9.

China’s National Development and Reform Commission asked some producers including COFCO Ltd., Yihai Kerry Investment Co. and 93 Group not to raise cooking oil prices in the next four months, the China Business News reported, citing an unidentified person who attended a conference of the top economic planner.

September-delivery palm oil on the Dalian exchange climbed 0.9 percent to 9,066 yuan ($1,361) a ton, the highest closing price since Nov. 12, and soybean oil for delivery in the same month advanced 0.9 percent to 9,718 yuan a ton, a two-week high.

CME Group Inc.’s March palm oil contract fell as much as 1.6 percent to $1,096.25 a ton.

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