Malaysian palm oil rose to a fresh one week high on Wednesday, tracking comparative oils higher on persistent uncertainty about whether output can keep pace with robust demand. Vegetable oil prices may have restarted their rally as heavy rains stall harvesting in Southeast Asian oil palm estates and Argentine soya crops continue to suffer from insufficient rains.
The benchmark April 2011 crude palm oil contract on Bursa Malaysia Derivatives ended up 1.7 percent at 3,732 ringgit ($1,220) a tonne after going as high as 3,735 ringgit, a level unseen since January 11. Overall, traded volume stood at 26,000 lots of 25 tonnes each, compared with a total of 11,293 lots on Tuesday. "The market is quite strong," said one trader.
"Bean oil in the United States was up yesterday, Dalian was also up - so everything externally looks positive. "The market is going on a buying spree," he added. "The market has resumed upwards, on the back of Malaysian weather still being uncertain and not being positive for the crop."
Malaysian markets are closed for a holiday on Thursday. ICDX's April CPO futures contract was at 10,915 rupiah per kg, compared to 10,825 rupiah per kg when it opened. Market volume was 2,020 lots of 10 tonnes each. Traders are also mindful of an expected 5 percent rise in export taxes to 25 percent due in February in Indonesia, the world's largest palm oil producer. "It was already factored into the market earlier," a trader said. "Indonesia is trying to protect its domestic prices." "(But) demand is still there, with uncertainty on production and supplies," he added.
Palm oil and soyaoil prices are likely to rally this year after Malaysia's stocks-to-use ratio fell to its lowest in seven years on tightening supplies and firm demand from Asian buyers.
The ratio, which shows the level of ending stocks as a percentage of total demand, fell to 9.2 percent in Malaysia for 2010 due to erratic weather curbing output for the past two years and rising orders from China and India. The most-active September 2011 soyaoil on the Dalian Commodity Exchange rose 1.5 percent. US soyaoil for March climbed 0.8 percent. "China soyaoil trekked higher overseas markets today," said a trader in Shanghai.
"Local factors including Beijing's move to control price hike by releasing vegetable oils reserve has faded away." US crude rose to near $92 a barrel on Wednesday, boosted by a fall in the dollar to two-month lows, while Brent crude extended gains on worries over a supply crunch.