Palm oil futures in Malaysia extended an eight-week rally on speculation that demand for the tropical crop is rising, depressing stockpiles, while the supply of rival soybeans may be hurt by drought in Argentina.
Palm oil and soybean oil are substitutes.
“Traders are friendly to the grains and oilseeds complex,” Geoff Clear, global co-head of commodities at Australia & New Zealand Banking Group, said in an interview. “There has been a very sharp drawdown of palm oil stocks.”
Stockpiles of palm oil in Malaysia fell 13 percent to 1.36 million metric tons in March, the lowest since July 2007, the nation’s palm oil board said April 10. Inventory in the second- largest producer after Indonesia was at a record in November.
July-delivery palm oil on the Malaysia Derivatives Exchange rose as much as 2.7 percent to 2,501 ringgit ($689) a ton in Kuala Lumpur, and closed 0.45 percent higher at 2,446 ringgit. Palm oil has surged 33 percent over the past eight weeks.
“Low stock levels boosted crude palm oil prices as there were talks of possible supply problems creeping into the industry,” an ECMLibra Investment Research report said today.
Stockpiles are “down 40 percent from the record, pushing prices up to range between 2,400 and 2,500 ringgit” a ton, said ANZ’s Clear. Traders “are long soybeans,” he said, referring to bets that prices will gain.
Argentina, the largest soybean oil shipper, is having its worst drought in more than four decades. The Buenos Aires Cereals Exchange lowered its 2009 soybean forecast by 6.1 percent to 37 million tons as the harvest may be the lowest in four years, according to an April 15 statement.
Planting Intentions
The U.S., the largest soybean grower, indicated this month that farmers may plant less than earlier expected. Soybean oil and palm oil are substitutes, accounting for about two-thirds of the world’s cooking oils.
Palm oil’s 44 percent surge this year compares with the 9 percent rise in soybean oil traded in Chicago, which was 1 percent lower at 36.42 cents a pound at 6:05 p.m. in Singapore. That’s cut soybean oil’s premium over palm oil to 20 percent, according to Bloomberg data, compared with an average over the past six months of 44 percent.
Palm oil exports from Malaysia rose in March for the first time in three months, according to the board. Overseas shipments in the first 20 days of April probably advanced 4.2 percent to 754,129 tons, cargo surveyor Intertek said today.
Still, palm oil could sustain the day’s earlier gains and may be “at risk of finding a peak for the next few weeks” until the U.S. Department of Agriculture reports actual soybean sowing by end of June, Clear said.
Soybean Plantings
U.S. soybean acres will rise 0.4 percent to a record 76.02 million acres, the U.S. Department of Agriculture said March 31 in a report on farmers’ planting plans. That was less than the 4.5 percent gain that had been forecast in a Bloomberg survey.
Palm oil futures “peaked out” at 2,540 ringgit a ton on April 15 and may decline toward so-called support levels at 2,058 ringgit, 2,201 ringgit and 2,315 ringgit, Maybank Investment Bank Bhd. said last week. Support refers to prices at which buy orders may be clustered.
Palm oil output usually rises in the second half of the year. Malaysia and Indonesia, the world’s biggest producers, have both forecast record production this year.
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