Agro Perspectiva

Palm Oil Gains as Decline to One-Month Low Attracts Buyers

27.08.2010 13:54 "Agro Perspectiva" (Kyiv) — Palm oil futures rose for the first time in three days after a drop to the lowest level in a month attracted some buyers. «It’s just a bounce back after such a big drop,» said Alvin Tai, an analyst at OSK Investment Bank Sdn. «It’s a very small gain compared with the loss in the past one week or so.» The November-delivery contract rose 1.8 percent to 2,530 ringgit ($805) a metric ton on the Malaysia Derivatives Exchange. Futures closed at 2,486 ringgit yesterday, the lowest since July 27, and have lost almost 7 percent since closing at the highest level in 15 months on Aug. 9. Malaysia’s palm oil exports fell 14.9 percent in the first 25 days of August to 939,456 tons from 1,103,439 tons shipped in the same period in July, cargo surveyor Societe Generale de Surveillance said yesterday. Rival Intertek said exports dropped 7.6 percent to 992,319 tons in the same period. «The most important thing is shipments from Malaysia need to pick up to provide support to prices,» Tai said. «If exports don’t pick up now then it gets difficult.» Soybean oil’s premium over palm oil «is still very narrow enough for people to buy soybean oil rather than palm oil,» Tai said. «Palm oil output in Indonesia is definitely picking up.» The premium reached $60.87 on Aug. 23, the smallest since April 6, according to Bloomberg data. It was $81.07 today, down from a 12-month average of $111.67. The oils are substitutes. Demand for the tropical commodity may increase as a gain in crude oil boosts lifts for biodiesel made from the vegetable oil, said Harish Galipelli, vice president at JRG Wealth Management Ltd., which advises traders. «Crude oil prices are recovering after hitting the lows and that is supporting palm,» he said. Oil rose for a second day in New York, buoyed by advancing equity markets and speculation that 9.8 percent drop this month has been excessive relative to the economic outlook. Crude fell to a seven-week low on Aug. 24. October-delivery futures rose as much as $1.1 to $73.63 a barrel and were at $73.41 at 12:21 p.m. London time. The November-delivery soybean contract, which was unchanged yesterday, rose as much as 1.4 percent to $10.1250 a bushel and traded at $10.0925 on the Chicago Board of Trade at 7:01 p.m. in Singapore. December-delivery soybean oil rose as much as 1.3 percent to 40.24 cents a pound. «After a continuous and sharp fall, soybean and soybean oil are recovering,» said Galipelli. «The entire oilseeds complex was weak.» The soybean crop will total 3.5 billion bushels, topping the U. S. Department of Agriculture’s forecast of 3.43 billion, according to the Professional Farmers of America newsletter last week. Soybeans have slipped 3.8 percent since reaching $10.49 a bushel on Aug. 5, the highest level in almost seven months. China’s 2009–2010 soybean imports may climb to 50 million metric tons, a jump of 22 percent from the previous year, the portal Grain.gov.cn said in e-mailed report today. Inbound shipments for August and September are estimated at 4.6 million tons and 4.5 million tons, the report said. Grain.gov.cn is owned by the China National Grain & Oils Information Center.