Malaysian palm oil futures rose to their highest level in nearly two months on Wednesday, recovering from the morning session losses, as investors banked on estimates that output had started to seasonally slow in the world's second-largest grower. Production traditionally rises in the second half of the year and peaks only in October, before slowing down towards the end of the year as palm oil trees rest and monsoon rains complicate harvesting.
But a group of planters on Tuesday estimated output fell by 10.5 percent in the first 20 days of October, fuelling expectations that end-stocks would stay below the two million tonne mark this year despite earlier bearish forecasts warning of surging stocks and production. The US soyaoil contract for December rose 0.4 percent in late Asian trade, while the most-active January soyabean oil contract on the Dalian Commodities Exchange rose 0.2 percent.
"The news about dropping production in October is the reason," said a trader with a local commodities brokerage in Kuala Lumpur. The benchmark January contract on the Bursa Malaysia Derivatives Exchange rose to 2,485 ringgit in late trade, the highest since August 28, before settling at 2,482 ringgit ($785) by Wednesday's close, a 1.1 percent climb. That brought prices up 1.8 percent so far this year, their first yearly rise since 2010.
Total traded volume stood at 32,615 lots of 25 tonnes each, slightly lower than the usual 35,000 lots. Technicals were slightly bearish. Malaysian palm oil still faces resistance at 2,449 ringgit per tonne, and may retrace to 2,406 ringgit, Reuters market analyst Wang Tao said.
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