Vegetable oils gain on China demand

Global vegetable oils stayed just below their two year highs on Friday as traders awaited more signs of continued demand from China for agriculture commodities and a stronger crude oil market. China, over the past week, purchased large quantities of soybeans to satisfy strong cooking oil and animal feed demand - helping boost vegetable oil markets.
The rally was also supported by a general weakness in the US dollar, making palm oil, soybeans and soyaoil cargoes priced in that currency cheaper. The benchmark January 2011 crude palm oil on the Bursa Malaysia Derivatives Exchange ended 0.6 percent higher at 3,007 ringgit ($968.7) - hovering below a more than two-year high of 3,021 ringgit hit the previous day.
"We believe an underlying US dollar weakness over the next few years would sustain an upward shift in soft commodity price movements," said Hwang DBS, a Singapore-based investment bank, in a research note. "The difference between US soybean prices has increased and the ringgit's appreciation consequently implies stronger palm oil prices in ringgit terms."
Volume was heavy with 14,048 lots of 25 tonnes each traded versus the usual 10,000 lots. Palm oil would stay above 3,000 ringgit as cargo surveyors Intertek Testing Services and Societe Generale de Surveillance issue October 1-25 export figures from Malaysia, which are expected to show more demand from China, traders said. Reuters technical analysis showed the commodity may retrace slightly lower to 2,971 ringgit before resuming an uptrend to 3,194 ringgit.
US soyaoil for December delivery rose 0.7 percent on strong demand from China, while Dalian Commodity Exchange's most active soyaoil futures eased from 26-month highs to trade at 9,244 yuan ($1,390) per tonne. "Imports of vegetable oil are getting more expensive and local prices have gone up by 10 percent," an oil analyst in Shanghai said. "The Chinese government may release more vegetable oil state reserves to limit the price rise." China's growth ebbed in the third quarter while inflation edged higher, suggesting that the world's second-largest economy was far from overheating although officials may not take chances with rising food prices, traders said.