Palm oil futures hit a new 27-month high on Wednesday and other vegetable markets gained as traders banked on strong export demand from China despite the country's central bank raising interest rates. Malaysia's January 2011 palm oil contract jumped as much as 2.3 percent to 2,985 ringgit ($960.7) per tonne, trading at a level unseen since August 2008 and hovering just below the crucial 3,000 ringgit level.
Exports of Malaysian palm oil products for October 1-20 rose 5.4 percent to 929,473 tonnes from 881,812 tonnes shipped from September 1-20, cargo surveyor Societe Generale de Surveillance said on Wednesday Traded volume almost doubled to 19,252 lots of 25 tonnes from each the usual 10,000 lots as traders put aside concerns that China's demand would stall in the country's efforts to tighten credit.
The most active May soyaoil futures on China's Dalian Commodity Exchange ended down just 0.4 percent at 8,980 yuan ($1,352) a tonne, after falling to over a month low of 8,812 yuan earlier in the day. "The Chinese government didn't raise the interest rate by much, and the thing that they are worrying now is the overheating of domestic inflation," said LMC International chairman James Fry at an industry conference in Kuala Lumpur.
Chinese vegetable oil demand was recovering from a slow start in October as cargo surveyors Intertek Testing Services and Societe Generale de Surveillance said overall Malaysian palm oil exports for October 1-20 rose as much as 5 percent versus a month ago. "I don't think China's strong demand for commodities, including palm oil, is going to get significantly hurt because of this interest rate hike but high prices of palm oil may limit demand growth," said a trader from Singapore. US December soyaoil climbed 1.7 percent in late Asian hours on expectations of still strong Chinese demand and aided by the weakening dollar.
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