Quoted from Business Times, 08.8.2010;
PALM oil reached the highest level in almost five months yesterday after a ban on grain exports by the drought- hit Russia sent prices of soybeans and corn soaring. October-delivery futures jumped as much as 2.9 per cent to RM2,695 a metric ton on the Malaysia Derivatives Exchange, the highest level since March 11. Prices have gained 6.4 per cent this week for the fourth straight weekly advance. “This year belongs to grains and oilseeds and oils will be no exemption,” Harish Galipelli, vice president at JRG Wealth Management Ltd., which advises traders, said by telephone from Hyderabad. “Weather disruption is going to set the market on fire for some time to come.”
Corn futures surged to 13-month high and soybeans extended a rally to the highest price since January after Russia halted grain exports Thursday. Corn jumped as much as 5.8 per cent, soybeans gained as much as 2.4 per cent, and wheat futures soared to a 23-month high on the Chicago Board of Trade Thursday. Palm oil has rebounded 18 per cent from a seven-month low on July 7 on speculation that demand may rise in Asian nations and futures will track advances in crude oil, soybeans and equities.
China, India, Pakistan and Indonesia mark festivals in the three months ending September, typically stoking edible-oils demand. Malaysia may have flooding in some of the main growing areas in November and December because of La Nina weather, the state forecaster said. La Nina may gain strength by the end of the year, bringing above normal rain in northern Sarawak and the state of Sabah, the Malaysian Meteorological Department said. Prices must jump to as high as RM3,200 to cool export demand as output declines in Malaysia and weather damages canola crops in Europe and Canada, Dorab Mistry, a director at Godrej International Ltd said Thursday. Malaysia’s production probably fell last month, lowering inventory, and is supporting prices, said Arhnue Tan, an analyst at ECM Libra Capital. Malaysian Palm Oil Board will release July’s production, inventory and export data next week.
“In the short term, weather will likely be the main driver of palm oil prices,” Tan Ting Min, a plantation analyst for Credit Suisse Group in Kuala Lumpur, said in a report. “If La Nina were to coincide with the monsoon at end-2010, palm oil harvesting could be disrupted due to flooding and heavy rainfall while extraction rates could fall.” Credit Suisse raised its estimate of the average palm oil price this year to RM2,600 from RM2,500 previously.
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