Malaysian palm oil futures recovered losses from early trade and nudged higher on Wednesday due to expectations of lower output growth from a crop damaging El Nino. Industry experts at a conference in Kuala Lumpur last week had forecast El Nino's dry weather effects to lower global palm production by 2-3 million tonnes, potentially pushing benchmark prices up to range between 2,700-3,000 ringgit a tonne by June.
Palm had earlier suffered its steepest drop in two weeks, tracking declines in rival vegetable oils and feeling the pressure of slowing demand, while traders booked profits.
The palm oil contract for May delivery on the Bursa Malaysia Derivatives Exchange rose 0.04 percent to reach 2,611 ringgit ($631) per tonne at the end of the trading day. It reached a one-month high of 2,632 ringgit earlier this week on Monday.
Trade volumes were 47,226 lots of 25 tonnes each on Wednesday at the close of trade.
"The market is continuing the upward movement after profit taking activities. Until further leads emerge, the market is still playing on the conference's suggested price range and production (forecast)," a Kuala Lumpur-based trader said.
Among other vegetable oils, May soybean oil on the Dalian Commodity Exchange was off 0.2 percent, while the Chicago soyoil contract shed 0.4 percent.
Palm oil gains could be capped by weak export demand, as consumption from top buyers China and India wane due to slowing economic growth.
Exports of Malaysian palm oil products for Mar. 1-15 fell 1.1 percent compared with February 1-15, recent data from cargo surveyor Societe Generale de Surveillance showed.
Data from Intertek Testing Services recorded a 10.5 percent jump in shipments for the same time period, but traders say this was off low volumes in February when activity slowed due to the Chinese lunar new year.
Trading activity however is expected to pick up this month before a 5 percent export tax on crude palm oil kicks in during April.
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