Malaysian palm oil futures rebounded from three-week lows on Wednesday on the back of a firmer overseas soya complex and expectations of strong overseas demand. US soya and soyaoil futures rose during Asian trading hours, driven by strong commercial buying and output pressure due to drier weather in Latin America.
"Malaysian palm oil was mainly affected by overseas soya and soyaoil markets. Investors are also expecting higher exports for November 1-25," said a trader with foreign brokerage in Kuala Lumpur, referring to Malaysia palm oil exports data due to release on Thursday.
Exports of Malaysian palm oil during November 1 to 20 rose 18.3 percent to 1,099,451 tonnes compared to a month ago, cargo surveyor Societe Generale de Surveillance showed earlier in the week. The benchmark February 2011 crude palm oil contract jumped as much as 3 percent earlier in the day, before paring some gains to close trade at 3,168 ringgit ($1,013).
Overall traded volume was 7,200 lots of 25 tonnes each, compared to the usual 10,000 lots. The same contract fell to a three-week low the previous day due to sharp sell-off in Asian commodity and equity markets after shelling between North and South Korea, and investors sought safety in buying the US dollar.
Palm prices were also supported by heavy monsoon season rains, which can halt harvesting and make transportation difficult in major planting states in Malaysia's mainland and Borneo island, another trader said. "Investors have factored in the fact that production is going to be lower this month as the second wave of the monsoon season may create floods in major plantation areas," said another trader in Kuala Lumpur.
Crude oil rose to near $82 on Wednesday, rebounding from losses seen in the previous session, on expectations of improved demand in top consumer United States. The most active September 2011 soyaoil on China's Dalian Commodity Exchange, that usually tracking domestic and overseas soyabean futures, jumped 2.1 percent in Asian hours.
"It looks like concerns about China's steps to curb food inflation has temporary faded away, currently investors are taking positions on worries over lower soyabean output caused by dry weather in South America," said Zhang Juan Cong, vegetable oil analyst with Dadi Futures in China's Southern city of Hangzhou. Soyabean yields in Brazil and Argentina were hit by La Nina weather pattern that brings lesser rainfall to Southern hemisphere.