Malaysian palm oil rises

Malaysian crude palm oil futures rose 1.2 percent on Tuesday as traders grew more concerned over heavy rains curbing production in the world's second largest producer of the vegetable oil. The market expected December production to fall by 10 percent to 1.31 million tonnes, the lowest in ten months as rains hit key oil palm growing areas in mainland Malaysia and Borneo island states of Sabah and Sarawak.
Tight palm oil supplies have offset a recent slowdown in exports and adds to concerns of a global squeeze in vegetable oils with South America facing weaker soyabean yields from scanty rains. "Palm oil could easily hit 4,000 ringgit early next year if the crazy weather continues," said a trader with a foreign commodities brokerage.
Benchmark March 2011 crude palm oil futures on the Bursa Malaysia Derivatives settled up 43 ringgit at 3,561 Malaysian ringgit ($1,132). Traded volumes stood at 15,119 lots of 25 tonnes each from the usual 10,000 lots. Palm oil at its highest level today is just 10.6 percent away from 4,000 ringgit level and further erratic weather may boost agricultural commodities.
Higher palm oil prices have prompted the Indonesian government to raise its export tax for January to 20 percent, industry sources said, which may limit supplies available for international markets. The strongest La Nina weather event in nearly half a century, resulting in heavy rains and flooding which has damaged crops and flooded mines in Australia and Asia, may be at its peak, the Australian weather bureau said.
Oil prices, which rose closer to $90 on cold weather in the United States and Europe, also supported vegetable oil markets. Other vegetable oils rose, partly supported by weather concerns in the US and Australia hitting the broader agriculture market complex.
US soyaoil for January delivery slipped in Asian trade hours after rallying in the previous session as much needed rains in key soya producer Argentina fell short in some areas.
The most active September 11 soyaoil on China's Dalian Commodity Exchange gained 0.9 percent to 10,176 yuan. "China's soyaoil might trade between 9,800 to 10,200 yuan until the end of this year," said an oil analyst with a Shanghai-based brokerage. "Production of Malaysian palm oil and South American soyabean could be lower in the following months, which could lift vegetable oil prices. But technically, the spread between the two products have to be adjusted to 900 yuan," he added.