Malaysian crude palm oil settled 1.19 percent high on Wednesday on expectations of strong demand and low stocks because of slower production. Erratic weather in many countries has damaged grains crops, including vegetable oils, and this is expected to drive prices of food higher, offering support for the palm oil market, dealers said.
Malaysia's June palm oil production rose just 2.5 percent to 1.42 million tonnes, even with the start of the high production season, as erratic weather lowered yields in key growing areas. "There is a lot of weather uncertainty in the United States, Russia and other countries. This is very supportive for palm oil," a trader with foreign-brokerage firm, said. The benchmark September contract on Bursa Malaysia's Derivatives Exchange ended up 28 ringgit at 2,381 ringgit ($745) a tonne - a level last touched on June 25. Overall volume stood at 10,665 lots of 25 tonnes each.
The worst drought in decades has destroyed crops in Russia, and Germany's farm co-operatives association (DRV) has cut its 2010 grain crop forecasts by 11 percent to 44.2 million tonnes, from last year because of hot weather. Hamburg-based oilseeds analysts Oil World forecast on Tuesday that the global 2010/11 soybean crop will fall to 255.79 million tonnes from 260.97 million tonnes in 2009/10 partly because of an expected fall in South American crops.
Expectations of good demand ahead of the Muslim festival of Ramazan in early August also lifted the market, another trader said. Market participants expected exports for the first 15 days would be more than 10 percent higher than the same period in June, the trader said. Other vegetable oils gained on Wednesday. US soyaoil for August delivery edged up 0.29 percent, while the most active January soyaoil contract on China's Dalian Commodity Exchange also rose 0.48 percent.
INDONESIA PALM TRADES: The Jakarta-based PT KPB Nusantara, formerly known as the state marketing centre, sold 10,000 tonnes of crude palm oil offered in an auction on Wednesday with a top price at 7,200 rupiah ($0.796) per kg, against 7,090 rupiah per kg on Monday. The centre did not hold an auction for local market on Tuesday.
Producers in Medan, home to Indonesia's main palm oil export port of Belawan, did not hold palm oil auctions on Wednesday. Refiners in Jakarta offered refined, bleached, deodorised (RBD) palm oil, used for cooking oil, at 7,650 rupiah per kg, against 7,600 rupiah per kg on Tuesday.
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