KUALA LUMPUR: Palm oil futures began the new year on a strong note on Monday, jumping more than 3%, as recent floods in several states in Peninsular Malaysia and shortage of labour caused supply concerns.

The benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange was up 157 ringgit, or 3.34%, at 4,854 ringgit ($1,163.75) a tonne, its highest level in more than three weeks.

Palm logged its third straight annual gain after rising 30.7% in 2021 as a pandemic-fuelled labour shortage hammered output in the world’s second-largest producer, while demand picked up after countries eased lockdowns. Prices are set to average around 4,149.57 ringgit ($995.34) this year.

Concerns about floods affecting production are likely to set in and cushion selling activities seen last week, a Kuala Lumpur-based trader said.

Seven states in Malaysia were hit by floods, as of Sunday, and thousands more people were evacuated, taking the total affected by heavy rainfall in the last two weeks to over 125,000, Malaysia’s National Disaster Management Agency said over the weekend.

Soyaoil prices on the Chicago Board of Trade were up 1.72%. The Dalian Commodity Exchange is closed on Monday for the new year holiday.

Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.

Palm prices are expected to stay strong in 2022 as production will remain constrained due to soaring fertiliser costs and long-standing labour shortages, the Council of Palm Oil Producing Countries said last week.

An escape from the 4,676 ringgit to 4,751 ringgit per tonne range could suggest a direction for palm oil, Reuters technical analyst Wang Tao said.