PALM oil futures climbed the most in more than two weeks yesterday after concerns eased about an escalation in clashes between South and North Korea, boosting commodity prices, and as soybean oil gained on dry South American weather.
The February-delivery contract jumped 1.7 percent to 3,168 ringgit ($1,009) a metric ton on the Malaysia Derivatives Exchange, the most since Nov. 9. January-delivery soybean oil gained as much as 1.1 percent to 50.12 cents a pound in Chicago.
Two South Korean soldiers were killed yesterday in the worst attack by North Korea on its neighbor in at least eight months, driving stocks and commodity prices lower. Palm oil fell to the lowest level in three weeks after the clashes, and also dropped yesterday on concern that China may reduce vegetable oil imports as it takes steps to cool food prices.
“Concerns about Korea and China seem to have eased and fundamental factors like weather and crop outlook seem to be in focus,” Ivy Ng, an analyst at CIMB Investment Bank Bhd., said from Kuala Lumpur. “People are still waiting to see if soybeans can emerge unscathed from the weather woes in South America.”
Dry weather this week will produce a two-month rainfall deficit of 7 inches (18 centimeters) across fields in South America, according to T-Storm Weather. A La Nina weather event has reduced soil moisture, the forecaster said.
Global demand for eight vegetable oils including palm will be larger than output for the first time in eight years in 2010- 11, according to a Nov. 19 report from Oil World, which also said China’s import reliance has reached “an alarming level.”
World output of vegetable oils will rise 5.2 million tons to 143.17 million tons in the year that started Oct. 1, while demand will climb 6.2 million tons to 143.9 million tons, it said. Palm oil, which has gained 29 percent over the past year, fell 4.3 percent on Nov. 22 and 2.2 percent yesterday.
“People might view current prices are reasonable after the recent decline and may resume purchases to replenish stocks,” CIMB’s Ng said. “Chinese steps to cool prices may be negative in the short term, but it will be positive in the medium term as they will need huge imports to rebuild reserves.”
China will sell soybeans and vegetable oil from reserves starting this week, the State Administration of Grain said on Nov. 19. Companies participating in state sales of vegetable oil cannot buy more than 5,000 tons in a single purchase or volume that exceeds 30 days of usage, the National Grain & Oil Trade Center said on its website today.
Source: Business Times
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