Palm Climbs to 14-Month High on Speculation Production Will Drop

Palm oil advanced to the highest level in more than a year on expectation that output may decline this month in Indonesia and Malaysia, the world’s top suppliers.

The contract for delivery in February gained 2.8 percent to 2,653 ringgit ($828) a metric ton on the Bursa Malaysia Derivatives, the highest level at close for most-active futures since Sept. 25, 2012. Prices entered a bull market this month and have advanced 8.8 percent this year, set for the first annual gain in three years.

Heavy rains may disrupt harvesting and reduce production in Indonesia and Malaysia in November, according to the Indonesian Palm Oil Association, which estimates yields in Indonesia to decrease by 15 percent to 20 percent this year.

“Supply is very tight,” said Chandran Sinnasamy, head of trading at LT International Futures Sdn. A weaker Malaysian currency may further boost purchases from China and India, the top cooking oil consumers, he said.

The Malaysian ringgit fell by the most in almost two months today and the Indonesian rupiah slid to the weakest level since March 2009, making exports cheaper in dollars.

Palm oil shipments from Malaysia fell 2 percent to 1 million tons in the first 20 days of November, less than a 13 percent drop in the first 10 days of the month, data from surveyor Intertek show. Exports from Indonesia surged 13 percent to 1.86 million tons in October, the highest in eight months, according to the nation’s palm oil association.

Biofuel Demand

Palm oil prices have rallied on biofuel demand, lower-than-expected output from Indonesia and Malaysia, and lower inventories in both countries from a year earlier, Lee Oi Hian, chief executive officer of Kuala Lumpur Kepong, said today. Output is trailing expectations due to weather and biological cycles of trees, Lee said.

Soybeans for January delivery rose 0.4 percent to $12.7925 a bushel on the Chicago Board of Trade. Soybean oil gained 1 percent to 40.95 cents a pound.

Refined palm oil for May delivery gained 1.6 percent to end at 6,370 yuan ($1,046) a ton on the Dalian Commodity Exchange and soybean oil climbed 1.2 percent to close at 7,272 yuan.

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