Malaysian palm oil futures hit a more-than-one-year high on Tuesday as traders bet on strong export growth after droughts had damaged the South American soy harvest that is crushed into competing soyoil. Worries about soybean crop damage in Brazil can potentially boost demand for palm oil and has upped the stakes in the unfolding US acreage battle between soy and corn with a key US government report due to be released on Friday.
Comments by leading analyst Dorab Mistry at a conference in China that palm oil will rise to 4,000 ringgit by end-June also pushed prices higher. "The export numbers are quite strong. And the second thing is, there was a downward revision in soy harvest in Brazil. The vegetable oil complex went up by quite a bit because they are very much determined by weather," said James Ratnam, an analyst at TA Securities in Malaysia.
Benchmark June palm oil futures on the Bursa Malaysia Derivatives Exchange inched up 0.6 percent to close at 3,481 ringgit ($1,139) per tonne after going as high as 3,497 ringgit, a level unseen since last March. Traded volumes stood at over 21,026 lots of 25 tonnes each, lighter than the usual 25,000 lots.
Palm oil faces a resistance zone of 3,487-3,504 ringgit per tonne, said Reuters market analyst Wang Tao based on technical analysis, adding that a break above will trigger a significant rise to 3,806 ringgit in the next three months. The edible oil futures started the week strongly as the latest Malaysian export data pointed to healthy demand outlook.
Exports rose 6.6 percent for the first 25 days of March from a month ago, said cargo surveyors Societe Generale de Surveillance respectively. "Crude palm oil production growth is poised to decline by 1.5 percent year-on-year to 1.4 million tonnes in March and this trend may continue throughout second quarter of 2012," said Alan Lim, an analyst at Kenanga Investment Bank, in a research note. In other vegetable oil markets, the most active US soyoil contract for May gained 0.2 percent in Asian trade while the most active September 2012 soyoil contract on China's Dalian Commodity exchange inched down 0.1 percent.