Palm Oil Climbs to Two-Week High as Output May Drop in Malaysia

Dec 26, 2013 5:44 am ET

Dec. 26 (Bloomberg) -- Palm oil advanced for a fifth day to the highest in more than two weeks on speculation a seasonal drop in production in Malaysia, the world’s second-largest supplier, will reduce stockpiles even as exports decline.

The contract for March delivery climbed 0.4 percent to close at 2,636 ringgit ($800) a metric ton on the Bursa Malaysia Derivatives, the highest for most active futures since Dec. 10. Prices are set for an 8.1 percent gain this year as output fell at plantations in Indonesia, the biggest supplier, and biodiesel demand increased.

Malaysian production fell 5.6 percent to 1.86 million tons in November from a month earlier, while inventories gained 7.2 percent to 1.98 million tons, the highest level since March, according to data from the Palm Oil Board. Output typically starts to decline from November, with January and February recording the lowest production numbers each year.

“We are seeing a tapering in production, it could be more pronounced in January and February,” said Paramalingam Supramaniam, director at brokerage Pelindung Bestari Sdn. in Selangor. “Stockpiles will reduce albeit gradually. The lower numbers in exports have been penciled in. The weaker ringgit is certainly helping and the charts are positive.”

The Malaysian currency declined 2.3 percent this month, making ringgit-denominated futures more attractive. Shipments from Malaysia fell 7.3 percent to 1.14 million tons in the first 25 days of December from a month earlier, Intertek said today. Exports dropped 7.6 percent to 1.14 million tons, according to SGS (Malaysia) Sdn.

Soybean oil for March delivery closed 0.4 percent lower at 39.41 cents a pound on the Chicago Board of Trade on Dec. 24, while soybeans gained 0.2 percent to $13.2275 a bushel.

Refined palm oil for May delivery climbed 0.3 percent to close at 5,942 yuan ($979) a ton on the Dalian Commodity Exchange. Soybean oil ended little changed at 6,874 yuan.

--Editors: Ovais Subhani, James Poole