Malaysian palm oil rallied to a 28-month high on Tuesday as traders bet on continued strong export demand amid lingering concerns over erratic weather in edible oil producing regions. Traders took positions ahead of a price outlook conference set to start on Wednesday in Indonesia where key analysts may likely paint a bullish picture for next year, pushing the market to its highest level this year.
"The market always gets optimistic ahead of a price conference like that, but this time, there is some credibility as demand is strong and production is under pressure," said a trader with a foreign commodities broker. Benchmark February 2011 palm oil on the Bursa Malaysia Derivatives Exchange jumped as much as 2.3 percent ringgit to 3,458 ringgit ($1,097), a level unseen since July 17, 2008. The contract later settled at 3,412 ringgit. Traded volumes more than doubled from the usual to 25,648 lots of 25 tonnes each.
Malaysia's November palm oil exports rose as much as 19.2 percent to 1.57 million tonnes from a month ago with orders from China almost doubling despite steps by the government release edible oil reserves to tame inflation. Demand from China may pick up further as the country prepares for the Lunar New Year holidays in early February. Palm oil has risen by more than a quarter so far this year, with much of the gains coming last month on heavy monsoon rains that have disrupted some harvesting rounds in oil palm growing regions in Malaysia.
Drier weather in the Americas has delayed soya plantings in Argentina and Brazil and hurt the US wheat crop. US soyaoil for December delivery rose nearly 1 percent in Asian trade. The most-active September soyaoil contract on the Dalian Commodities Exchange jumped 1.7 percent. Oil slipped on Tuesday, partly reversing sharp gains of the previous session, on concerns China may raise interest rates and cap energy demand growth, while a slowdown in Japanese and South Korean factory output added to evidence of a slowdown in Asia.