Malaysian palm oil futures climbed to a five-week high on Thursday on expectations for stronger demand and as monsoon-driven floods in the country's key producing regions sparked concerns of supply disruptions. Malaysian crude palm oil cargoes are likely to be cheaper than rival Indonesia's with the former setting its January export tax rate at zero compared to the latter's 7.5 percent.
The price advantage could spur demand for Malaysian crude palm oil at a time when production is seasonally lower and faces potential disruption from heavy rains, lifting hopes that record stocks could come down after driving down prices by 22 percent this year.
"The gains today are mostly headline driven with the flood news and all that, although it (the flood) has been easing a bit after Christmas," said a dealer with a foreign commodities brokerage in Malaysia. The benchmark March contract on the Bursa Malaysia Derivatives Exchange rose to 2,484 ringgit ($810) per tonne - the highest level seen since November 20 - before settling at 2,479 ringgit, two percent higher than previous day's close. Total traded volumes stood at 37,912 lots of 25 tonnes each, higher than the usual 25,000 lots.
Malaysian palm oil futures are expected to recover in the first quarter of next year even after the market faces its biggest yearly loss since 2008 on expected stronger demand for crude palm oil. Exports in the first 25 days of December rose as much as 3 percent due to bigger purchases from India, the world's top edible oil importer, and the United States, cargo surveyor data showed.
In other competing vegetable oil markets, US soyaoil for January delivery rose 0.9 percent in late Asian trade on expectations of strong Chinese food demand. The most active May 2013 soybean oil contract on the Dalian Commodity Exchange rose 0.5 percent.