Palm futures soar as commodities rally

Palm oil futures posted the biggest gain in 10 days after a surge in soybean oil prices widened the gap between the world’s two most consumed edible oils. Soybean oil was 30 per cent more expensive than its rival yesterday, according to Bloomberg data, after the vegetable oil closed up 5.6 per cent on the Chicago Board of Trade. That was the widest gap in a week.

Today’s palm oil gain narrowed the difference to 27 per cent. “The fundamental case for palm oil is very sound at the moment, mainly because the differential between soybean oil and palm oil provides a lot of support,” Nirgunan Tiruchelvam, an analyst at Royal Bank of Scotland Asia Securities (Singapore) Pte, said by phone. Prices eased slightly on mild profit-taking after soaring to intraday high of MYR2,248, says trading executive from Kuala Lumpur-based commodities brokerage; adds market may ease further to cover price gap between yesterday's settlement price, today''s intraday low. "The current rally in prices not sustainable, as CPO futures rose in tandem with CBOT soyoil gains. A downward price correction for soyoil is likely and this may weigh on CPO prices in the next trading session," says Singapore-based trading executive

Palm oil could average US$700 a ton in 2009, he said. The commodity has averaged US$610 so far this year.

Palm oil for October delivery soared as much as RM103, or 4.8 per cent, to RM2,248 (US$638) a ton on the Malaysia Derivatives Exchange, the biggest intra-day gain in 10 days. The contract closed 2.1 per cent higher at RM2,189, down 1.8 per cent for July, a third month of decline.

Soybeans for November delivery yesterday surged 6 per cent, the biggest advance in nine months in Chicago, amid a broader commodities rally, spurred partly by demand for a hedge against inflation as the dollar fell. The contract advanced 0.3 per cent to US$9.74 a bushel at 5:56 pm in Singapore. Soybean oil, crushed from the oilseed, was unchanged at 35.68 cents a pound after gaining as much as 6.5 per cent yesterday.

Crude oil in New York closed up 5.7 per cent yesterday at US$66.94 a barrel. The most active futures gained as much as 1.3 per cent today before trading at US$66.72 a barrel at 5:59 pm Singapore time. Vegetable oils track crude oil as they can be used as fuel substitutes.

Malaysian Exports Palm oil exports from Malaysia, the second largest producer, probably advanced for a third month, rising 14 per cent in July to 1.4 million tons, according to independent surveyor Intertek today. The gain was 15 per cent to 1.41 million tons, estimated Societe Generale de Surveillance, another independent cargo surveyor.

Export gains are needed to boost prices, amid record production, as palm oil is 20 per cent below the year’s high of RM2,799 reached on May 13 and “the market is pricing in for much stronger second half 2009 production,” said a Credit Suisse report today by analysts Teddy Oetomo and Agus Sandianto in Jakarta. Output in Malaysia, the No. 2 producer, gained a fourth month in June on a month-on-month basis, the country’s palm oil board said July 10.