Most vegetable oil markets rebounded on Tuesday with palm oil erasing most of its losses made the day before as hopes of better exports and lingering fears of tight supplies boosted sentiment. Vegetable oil prices are gaining as traders anticipate that China's economy may be bottoming out, leading to an increase in orders, and the brewing El Nino weather condition.
Malaysian palm oil jumped 6 percent to close at 2,286 ringgit ($645). US soyoil for July shipment climbed 1.5 percent and the most-traded January 2010 soyoil contract on Dalian's Commodity Exchange narrowed earlier losses.
"Further correction in crude palm oil prices from current levels, we believe, is likely to be shallow or mild as downside will be supported by recent positive and new developments," said J.P. Morgan analyst Simone Yeoh. The firm raised its crude palm oil price forecast to 2,450 ringgit from 2,100 ringgit previously, citing tight soybean supplies until 2010, firmer crude oil prices and El Nino having more than 50 percent chance of happening as the main factors.
The soybean complex has edged higher as tight supplies of old crop beans outweighed an improved weather outlook for young crops, traders said. Although palm oil production is expected to increase in the second half as biological tree stress, which settled in this year after record harvests in 2008, starts to fade, some traders were on lookout for an El Nino weather event developing.
INDONESIA PALM TRADES: Indonesian state firms sold 8,000 tonnes of crude palm oil on Tuesday at the launch of an exchange-traded contract, aimed at establishing a new benchmark in the world's top producer. On the first trading day, the state firms sold palm oil at a top price of 7,008 rupiah ($0.673) per kg.
The Jakarta-based state marketing centre, which usually sells palm oil from the state firms, did not hold an auction. On Monday, it sold 7,500 tonnes of crude palm oil at 6,943 rupiah ($0.669) per kg. Producers in Medan, home to Indonesia's main palm oil export port of Belawan, sold palm oil at 7,010 top price.
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