Palm oil futures climbed to the highest level in almost 30 months on speculation that a drop in November output and stockpiles in Malaysia, the second-largest producer, may strain global supplies.
February-delivery futures gained as much as 1.3 percent to 3,679 ringgit ($1,174) a metric ton, the highest since June 18, 2008, and ended the morning session at 3,678 ringgit. The contract advanced 3.3 percent last week.
"The production outlook for December is looking no better as rainy weather continues to plague estates and the sector is going into its seasonal down cycle which typically occurs in the January-March period," Bernard Ching, an analyst at ECM Libra Capital Sdn., said in a report today.
Output in Malaysia fell to the lowest level in five months while stockpiles slid for the first time in four months. Heavy rainfall caused by a La Nina weather event has reduced oil-palm yields in Indonesia and Malaysia, the biggest producers.
Production declined 11 percent to 1.46 million tons last month from 1.64 million tons in October, according to data from the Malaysian Palm Oil Board. Inventory dropped 8.7 percent to 1.64 million tons from 1.79 million tons, and exports gained 2.7 percent to 1.5 million tons.
Malaysian inventory may decline further with a pick-up in demand for the festival season, Ching said. Chinese purchases rise before the Lunar New Year, when demand for food soars. The celebration will take place in early February.
Trading Curbs
Palm oil has rallied 38 percent this year, headed for its second straight annual advance, on optimism that rising demand in China may strain global supplies curbed by rain and drought in producing nations. The gains may extend in early 2011, ECM Libra's Ching said. Prices above 4,000 ringgit may cool demand among consumers and prompt China and India to impose trading restrictions to cool inflation, he said.
China will offer 300,000 tons of reserve soybeans stored under the so-called inter-province stock rotation program in auctions on Dec. 14, the official information provider National Grain & Oil Trade Center said today on its website.
March-delivery soybean oil rose as much as 0.3 percent to 54.78 cents a pound in Chicago and traded at 54.73 cents at 11:15 a.m. in Singapore, while soybeans for delivery in January traded 0.5 percent higher at $12.7875 a bushel.
Palm oil on the Dalian Commodity Exchange for September delivery climbed as much as 1.7 percent to 9,352 yuan ($1,404) a ton, while soybean oil for delivery in the same month added as much as 1.5 percent to 9,952 yuan, the highest since Nov. 15.
CME Group Inc.'s March palm oil contract, pegged to the Malaysian benchmark price, surged as much as 1.4 percent to $1,153 a ton, equaling the highest level since the contract began trading in May.
