Palm oil climbed to a five-week high as soybeans rallied on concern that dry weather in the U.S. may hurt crops in the largest grower of the oilseed crushed to make an alternative oil.
The contract for November delivery gained 1 percent to 2,333 ringgit ($712) a metric ton on the Bursa Malaysia Derivatives, the highest price at close for the most-active contract since July 11. Palm for physical delivery in September was at 2,400 ringgit, according to data compiled by Bloomberg.
Soybeans in Chicago extended the best weekly advance in more than a year as the U.S. government cut its forecast for the 2013 harvest after excessive rains in May and June reduced planted acreage and damaged yields. Dry weather is expected to continue across the west-central Midwest for the next 10 days and moisture shortages and stress will build for soybeans and corn, MDA Information Systems LLC said in an Aug. 16 report.
“The current weather conditions in the U.S., which is driving soybean oil prices up, will have a positive spillover effect on palm oil prices because soybean oil is a close substitute to palm oil,” said Sim Han Qiang, an analyst at Phillip Futures Pte. in Singapore. “When soybean oil prices increase, it tends to put buying pressure on crude palm oil.”
Soybean oil’s premium over palm oil gained to $249.90 a ton today from $245.82 on Aug. 16, according to data compiled by Bloomberg. Soybean oil for delivery in December rose 0.7 percent to 43.44 cents a pound on the Chicago Board of Trade. Soybeans for November advanced 1.6 percent to $12.7825 a bushel. The most-active contract advanced 6.5 percent last week, the steepest gain since the five days ended July 20, 2012.
Refined palm oil for January delivery advanced 0.4 percent to close at 5,634 yuan ($920) a ton on the Dalian Commodity Exchange. Soybean oil prices increased 0.6 percent to end at 7,232 yuan a ton.