Malaysian palm oil futures rallied to a two-week high on Thursday as traders took advantage of a falling ringgit, supported by gains in competing markets and signs that the El Nino weather phenomenon could already be hurting output in East Malaysia. The August contract on the Bursa Malaysia Derivatives exchange was up 1.4 percent at 2,206 ringgit ($605.88) a tonne by Thursday's close. Prices earlier touched 2,219 ringgit, their highest since May 13. Total traded volume stood at 43,601 lots of 25 tonnes each, well above the average 35,000 lots traded by close.
Benchmark palm prices have pulled up from more than three-week lows this week, following a surge in the Chinese and US soy markets, with robust export demand so far in May also fuelling the rise. Gains on Thursday were also supported by early signs that a strong El Nino weather pattern may be reducing output from the world's No 2 palm oil producer, traders said. Such a pattern results in below-average rainfall in top palm producers Indonesia and Malaysia.
"The weather in East Malaysia is unusually hot and dry," a trader at a local commodities brokerage told Reuters on Thursday, adding that the dry conditions were expected to continue in June. "Yields are already plunging in the states of Sabah and Sarawak." The El Nino weather phenomenon predicted by meteorologists could push depressed palm oil prices as high as $700 a tonne this year, an industry group in top producer Indonesia said last week, although it said production was unlikely to be impacted until early 2016. The US July soyoil contract gained 0.95 percent in late Asian trade, while the most active September palm oil contract on the Dalian Commodity Exchange was up 0.83 percent.
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