KUALA LUMPUR: Crude palm oil (CPO) for third month futures rose by RM56 to RM3,420 per tonne at midday on Thursday, the highest since March 2012.
Bloomberg reported the strong CPO price was due to surging soybean oil prices and lingering concerns over production in Malaysia, which is the second-largest grower, because of a labour shortage.
It reported US soybeans climbed to a six-year high as rising demand from top importer China and dry weather in the major producing areas of South America threatened supplies.
Soybeans have jumped more than 40% since March, helped by a surge in buying by China to meet demand for hog feed and poor rains in Brazil and Argentina.
Soybean oil is also at the highest in more than six years.
“All markets are on fire and palm is following, ” said Rajesh Modi, a trader at Sprint Exim Pte in Singapore. Although demand is weak at these prices, low stockpiles across all edible oils and weaker production are driving the market.
Bloomberg reported that still, palm is vulnerable. Its narrow discount to soybean oil, which hurts demand in price-sensitive markets like India, and the decade-high premium over gasoil may deter some investors. Any forecasts for rain in South American growing areas would also cool prices.
Indonesia, the largest producer, will likely put on hold its plan to use higher biodiesel blending in gasoil next year, as the government has to provide a larger stimulus to the biodiesel program on the back of rising prices.
On the technical front, palm oil’s 14-day relative strength index hovered around 70, which is an overbought signal.
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