Palm Oil Advances as Soybeans Jump Most in Six Months on Supply

Palm oil climbed after soybeans rallied the most in more than six months yesterday on signs that U.S. stockpiles are tightening, increasing concerns that global oilseed supplies may dwindle.

The contract for delivery in March advanced 1.1 percent to 2,398 ringgit ($796) a metric ton, the biggest gain at close since Jan. 2, on the Malaysia Derivatives Exchange in Kuala Lumpur. That helped trim losses to 1.7 percent this month.

Soybeans rallied 3.3 percent in Chicago yesterday, the most at close since July 5, after a U.S. Department of Agriculture report on Jan. 11 showed inventories fell 17 percent from a year earlier to 1.966 billion bushels as of Dec. 1, the lowest in nine years. Soybean oil’s premium over palm oil was at $319.04 a ton today, compared with a five-year average of $179.76 a ton, according to data compiled by Bloomberg.

“Over the immediate period, we should see prices recovering because of the oncoming production down-cycle for palm oil which is expected to ease inventory,” said Arhnue Tan, an analyst at Alliance Investment Bank Bhd. in Kuala Lumpur. “This could add to concerns over soybean supply shortage.”

Production in Malaysia, the largest grower after Indonesia, is typically at a cyclical low in January and February each year. Output this year may match the all-time high of 18.9 million tons recorded in 2011, Choo Yuen May, director-general of the Palm Oil Board said yesterday. Production totaled 18.8 million tons in 2012 while stockpiles reached a record of 2.63 million tons in December, data from the board showed.

Exports Drop

Exports from Malaysia declined 21 percent to 570,510 tons in the first 15 days of this month from the same period in December, Intertek said today. That compares with a 25 percent drop in the first 10-day period of this month. Shipments retreated 22 percent to 571,481 tons over 15 days, according to Societe Generale de Surveillance.

Refined palm oil for delivery in May increased 0.4 percent to close at 6,726 yuan ($1,082) a ton on the Dalian Commodity Exchange. Soybean oil for May rose 0.8 percent to end at 8,594 yuan a ton.

Soybeans for March delivery fell 0.5 percent to $14.1075 a bushel on the Chicago Board of Trade. Soybean oil for delivery in March advanced 0.3 percent to 50.58 cents a pound, extending yesterday’s 2.5 percent rise at the close.

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