Global vegetable oil markets surged on Monday as investors took positions on concerns a dry spell may curb grain output in the Americas. Agriculture markets have been moving higher on concerns erratic weather across the globe will limit supplies for the food sector, potentially stoking inflation in China.
The most active May soyaoil contract on China's Dalian Commodity Exchange hit a fresh record and RBD palm olein futures jumped as much as 3.8 percent ahead of China's long holidays that start on Wednesday.
The benchmark December crude palm oil contract on Bursa Malaysia closed 81 ringgit higher at 2,720 ringgit ($876.5) after hitting five-week highs earlier in the session. US soyaoil for October delivery climbed 2 percent. "Compared to other vegetable oils, China palm oil is mainly dominated by funds and there's still room for the price to increase," said Zhang Juan Cong, an oil analyst with Dadi Futures in Zhejiang province.
"Soyaoil has touched its highest level in this half-year, I think it could go up at least 5-6 percent in the short term." Chinese traders say they have been restricted from raising prices by the government due to worries over inflation, while many merchants have completed a build-up of stocks ahead of Mid-Autumn and National Day holidays.
"Traders are taking positions on Dalian Commodity Exchange to increase the amount of initial margin to cover the potential losses ahead of the long holidays," said an analyst in China's main soy producing province of Heilongjiang. China's financial markets will be closed from Wednesday onwards for the Mid-Autumn festival.
The markets will reopen Monday and close again on October 1 for another week. Although the US is expected to reap a record soyabean crop this year, some analysts fear dry weather in South America could threaten plantings in the key soy producing region - triggering a rally in US soya prices to a 14-month top. The US is expected to get better corn yields from the western Midwest but is unlikely to make up for the deficit in the dry eastern region at a time when China may import more corn.
INDONESIA PALM OIL TRADES: In Indonesia, Jakarta-based PT KBN Nusantara, formerly known as the state marketing centre, sold 11,000 tonnes of crude palm oil at top price of 8,198 rupiah ($0.913) per kg in auction on Monday, against 8,023 rupiah per kg in auction on Friday.
Producers in Medan, home to Indonesia's main palm oil export port of Belawan, did not hold any auction on Monday. Refiners in Jakarta offered refined, bleached, deodorised (RBD) palm olein - used as cooking oil - at 8,600 rupiah, while RBD palm olein sold at 8,650 rupiah per kg on Friday.
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