KUALA LUMPUR: Malaysian palm oil futures ended higher on Thursday, recovering losses from the previous session to trade at their highest in one-and-a-half years on strong export data and concerns of a drought squeezing supplies.
Dry weather in parts of Malaysia and Indonesia has caused some stress in oil palm trees, traders said, curbing the growth of palm fruit and causing a larger-than-expected drop in output this month.
"It's too dry. Crude palm oil production is most likely down by double digits. The mills are complaining they are not getting enough fresh fruit bunches," said a trader with a foreign commodities brokerage.
Yields could be further hindered in the next few months if there is no relief to the dry spell, the trader added.
By Thursday's close, the benchmark May contract on the Bursa Malaysia Derivatives Exchange had inched up 1.7% to RM2,755 (US$832) per tonne, the upper end of the day's trading range and the highest since September 2012.
Total traded volume stood at 39,428 lots of 25 tonnes, slightly above the usual 35,000 lots.
A pick-up in demand also buoyed prices of the tropical oil. Cargo surveyor Intertek Testing Services reported that exports of Malaysian palm oil products in Feb 1-20 rose 16.9% to 875,901 tonnes from a month ago, thanks to bigger shipments to top buyer India.
Another cargo surveyor Societe Generale de Surveillance showed export figures for the same period climbed 16.7%.
"I am expecting the market to continue to go up. As long as demand shows improvement, like today's numbers, it will give support to the market," the Kuala Lumpur-based trader added.
US soybeans edged higher on Thursday, underpinned by concerns over supplies from top exporter Brazil and a lack of Chinese cancellations of US cargoes.
Smaller supplies of the competing oilseed available for crushing would lift soyoil prices, widening the premium over rival palm oil and potentially channelling demand to the tropical oil instead.
In vegetable oil markets tracked by palm, the US soyoil contract for May gained 1.3 % in late Asian trade. The most active May soybean oil contract on the Dalian Commodities Exchange slipped 0.2%.
In other markets, Brent crude slid below US$110 a barrel on Thursday, dragged down by a survey that pointed to slower growth in China, the world's second largest oil consumer.
Palm, soy and crude oil prices at 1011 GMT
Contract Month Last Change Low High Volume
MY PALM OIL MAR4 2762 +54.00 2702 2762 652
MY PALM OIL APR4 2769 +53.00 2709 2771 3123
MY PALM OIL MAY4 2755 +47.00 2700 2756 20585
CHINA PALM OLEIN MAY4 6100 -20.00 6024 6102 429242
CHINA SOYOIL MAY4 6810 -12.00 6754 6812 248420
CBOT SOY OIL MAR4 40.78 +0.54 40.09 40.88 6871
NYMEX CRUDE MAR4 103.30 -0.01 102.97 103.50 1959
Palm oil prices in Malaysian ringgit per tonne, CBOT soy oil in US cents per pound, Dalian soy oil and RBD palm olein in Chinese yuan per tonne, crude in US dollars per barrel. - Reuters