Malaysian palm oil futures rebounded on Wednesday as a US government report showing tight grain stocks owing to rising biofuel use spurred concerns over the prospect of limited food supplies. A US Department of Agriculture report showed corn stocks have hovered near 15-year lows for longer than expected due to the grain's use in making ethanol, lifting vegetable oils that are also used in other competing renewable fuels.
High stocks in Malaysia however are expected to weigh on palm oil prices although the vegetable oil's rising discount to competing soyoil has prevented the market from going below 3,000 ringgit a tonne in the short term. Cash refined, bleached and deodorised (RBD) palm olein's discount to soyoil has widened to $170 a tonne, the highest since November 2008, Reuters data showed.
"Crossing the 3,000-ringgit level will happen but for now, low corn stocks and pretty firm demand will prevent that. Crude oil staying above $90 is also supportive," said a trader with a foreign commodities brokerage. The benchmark September crude palm oil contract on the Bursa Malaysia Derivatives exchange rose 48 ringgit, or 1.6 percent, to close at 3,082 ringgit ($1,016.50) per tonne.
Overall traded volume stood at 21,582 lots of 25 tonnes each, well below the usual 25,000 lots. Reuters technical analysis showed the palm oil market was technically neutral, and a further development of the chart was needed to tell its next direction. The price gain has been limited by June's Malaysian palm oil stocks data that showed an 18-month high as overall production was higher than exports. US soyoil for August delivery rose 0.5 percent and the most active May 2012 soyoil contract on China's Dalian Commodity Exchange climbed 1.4 percent.