Palm oil futures in Malaysia rose to their highest in almost nine months as manufacturing in China grew for the first time in nine months, boosting optimism demand will increase as the global economy recovers from recession.The CLSA China Purchasing Managers’ Index advanced to a seasonally adjusted 50.1 in April from 44.8 in March, CLSA Asia Pacific Markets said in an e-mailed statement today. A reading above 50 indicates an expansion.
“Global orders down the manufacturing chain are increasing,” said Carey Wong, an analyst at Oversea-Chinese Banking Corp in Singapore. “It’s all part of the recovery play. People are buying into these hopes.”
Palm oil for July delivery jumped as much as 7.8 per cent to RM2,798 (US$793) a ton on the Malaysia Derivatives Exchange, the highest since August 8, and was at RM2,788 at 4:26 pm. Futures have rallied for six months.
Drought damage to South American soybean crop and lower US soybean planting pushed up palm oil prices 30 per cent in April, the biggest monthly gain since December 2001. Palm and soybean oils are substitutes in their applications in food and fuel.
“A combination of soybean crop failure concerns in Latin America and a lower-than-expected Malaysian palm oil inventory” have fueled the rally in palm oil, Rachman Koeswanto, an analyst at PT Deutsche Bank Verdhana in Jakarta said in a report.
Stockpiles in Malaysia, the world’s second largest producer, fell 13 per cent in March to 1.36 million tons, the lowest since July 2007, according to the palm oil board.
Koeswanto raised his average price forecast for the year to RM2,100 a ton from 1,700 a ton previously. - Bloomberg
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