Palm oil climbs for second day as soy faces dry weather

Palm oil gained for a second day on concerns that dry weather may reduce the soybean crop in Brazil and Argentina and lower global vegetable oil supplies.

The March-delivery contract rose as much as 1 per cent to 3,015 ringgit ($948) per metric tonne on the Malaysia Derivatives Exchange and traded at 2,990 ringgit at 12:08pm in Kuala Lumpur. Futures fell 3.2 per cent last week and have lost 21 per cent this year.

Hot conditions will boost stress on plants in parts of South America after below-normal rain in the past month cut soil moisture, potentially affecting about half of Argentina’s corn and soybeans and a quarter of the crops in Brazil, Commodity Weather Group LLC said last week.

“Palm oil is boosted by gains in soybean on worries that the South American crop may be affected as the weather is looking a bit dry,” Ivy Ng, an analyst at CIMB Group Holdings Bhd, said by phone from Kuala Lumpur.

Soybeans for March delivery gained as much as 1.3 per cent to $11.545 per bushel on the Chicago Board of Trade, the highest level since November 23, before trading at $11.43. Soybean oil, a substitute for palm oil, gained as much as 1 per cent to 50.44 cents a pound, extending a 1.2 per cent rally on December 16.

“Exports may pick up from December-end or January ahead of the Chinese new year,” Ng said. The weeklong Lunar New Year holidays will start on January 23.

Malaysian exports fell 16.6 per cent to 668,385 tonnes in the first 15 days of December, surveyor Intertek said on December 15. Shipments declined 19.2 per cent to 649,138 tonnes during the same period, Societe Generale de Surveillance said. The companies will release tomorrow the export data for the December 1-20 period.

Palm oil for delivery in May fell 0.5 per cent to 7,798 yuan ($1,228) per tonne on the Dalian Commodity Exchange and soybean oil for September delivery was little changed at 8,802 yuan.