Palm oil prices rose on Friday, prompting buyers in Europe to cover their positions and spurred by concerns over weather in South America and China's soyabean purchases, traders said. Malaysian crude palm oil futures climbed to a near two-month high on hopes that Greece will soon secure a bailout package, while dry weather fears in soya-producing South America also provided support.
The US Department of Agriculture (USDA) last week sharply lowered its estimates for soyabean crops in Brazil and Argentina, which kept prices of all oilseeds and vegetable oils in Europe firm. Palm oil on the European vegetable oil market rose $60 a tonne in the past three weeks to $1.120 for nearby contracts.
"Drought in South America, and expectations that China will be buying pushed prices up," one trader said. "People fear that when China steps in, prices will move up and they rushed to cover their positions." A delegation from China, which buys 60 percent of all soyabean traded, signed agreements on Wednesday to buy 8.62 million tonnes of US soyabeans and will ink more deals for a total of about 12 million tonnes during a visit to Iowa.
In a 10-year outlook, the US Department of Agriculture said Chinese soyabean imports would rise by 59 percent, to 90 million tonnes, by 2021. "In the course of 2012 consumers in the importing countries will become increasingly dependent on US supplies, owing to the sharply reduced South American soyabean production," German-based analyst Oil World said in its weekly report.
"I expect the (palm oil) market to be steady to firm in the next few months," another trader said. "The winter kill in eastern Europe which affected rapeseed crop has also created demand for palm oil." Extreme sub-zero temperatures may have killed rapeseed plants in parts of Ukraine, usually the main exporter of the oilseed to the European Union, after the Black Sea producer already saw a poor sowing campaign due to drought.