Rise in palm oil price reflects high demand

Singapore: Palm oil advanced for a third day as demand for the tropical oil, used in food and biofuels, was seen rising amid tightening supply of competing vegetable oils.

October-delivery palm oil gained as much as 1.1 per cent to 3,025 ringgit (Dh3,700) a tonne on the Malaysia Derivatives Exchange and closed at 3,015 ringgit a tonne in Kuala Lumpur. The most-active contract fell for a third week, losing 1.2 per cent.

India, the world's largest palm oil buyer, may boost imports to a record, gaining 10 per cent to about 7 million tonnes in the year ending October 31 from a year ago, as rising incomes boost demand for processed food, according to a Bloomberg News survey of five processors and analysts.

"If their local crop is having some problems, they would need to import more," driving prices higher, Donny Khor, a senior vice-president for futures and options at OSK Investment Bank, said by phone from Kuala Lumpur yesterday.

The area of monsoon-sown peanut in India may decline 10 per cent from 4.98 million hectares last year, as farmers switched to planting cotton after prices of the fiber surged to a record, according to GG Patel and Nikhil Research Co.

Imports

That may push the nation's imports because peanut produces more oil than soybeans, said B.V. Mehta, executive director of the Solvent Extractors' Association of India.

Strong demand in emerging markets and the growing popularity of palm oil in developed countries, as well as the limited supply of other vegetable oils will keep the market "resilient", Golden Agri-Resources Ltd, the world's largest oil palm planter, said in a statement on Friday.

Stockpiles

Stockpiles of palm oil in Malaysia, the world's second-largest producer, dropped to 2 million tonnes in July from 2.05 million tonnes in June, the Malaysian Palm Oil Board said on Wednesday. That was lower than the median estimate of 2.07 million tonnes in a Bloomberg survey of three analysts and two plantation companies.

Output slipped 0.1 per cent to 1.75 million tonnes, while exports rose 9.1 per cent to a record 1.73 million tonnes, the board said.

Soybeans for delivery in November gained as much as 0.8 per cent to $13.42 per bushel in Chicago, before trading little changed at $13.3125 in Singapore. Soybean oil for December delivery climbed as much as 0.8 per cent to 55.02 cents per pound.

Palm oil for May delivery added 0.1 per cent to 8,774 yuan ($1,372) a tonne on the Dalian Commodity Exchange and soybean oil for delivery in the same month ended little changed 9,968 yuan a tonne.

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