KUALA LUMPUR: Malaysian palm oil futures opened the year strongly on Tuesday, rising to a two-week high on weak output and a firm performance by fellow oilseed soy.
Palm was also supported by a weaker ringgit, palm's traded currency, which made it cheaper for holders of foreign currencies.
Benchmark palm oil futures for March delivery on the Bursa Malaysia Derivatives Exchange rose 1.7 percent to 3,163 ringgit ($704) a tonne at the close of trade, its strongest daily gain in a week. The ringgit fell 0.1 percent against the dollar.
Palm earlier touched 3,172 ringgit, its highest level since Dec. 19. Traded volumes stood at 43,665 lots of 25 tonnes each at the end of the trading session.
"Production is not picking up, we have more shortfall than normal," said a trader from Kuala Lumpur, adding that he expects a double-digit fall in December output compared with November.
A second trader said the market was up on a weaker ringgit and strong sentiment rival soy. Palm prices track the movements of soyoil, as they both compete for a share in the global vegetable oils market.
Palm oil output in Malaysia, the world's second-largest producer, fell 6.1 percent to 1.57 million tonnes in November from a month earlier. End-stocks rose 5.2 percent to 1.66 million tonnes.
Year-end rains from the monsoon season have also disrupted the fruit-harvesting process, causing tight supplies in the market, say traders, who expect to see declines in December output.
In related edible oils, the March soybean oil contract on the CBOT rose 0.9 percent, while the May soybean oil contract on the Dalian Commodity Exchange was down 0.6 percent.
The May contract for Dalian palm olein gained 0.3 percent. - Reuters