Palm oil touches 1-week high ahead of USDA data

JAKARTA: Malaysian palm oil futures rose to a one-week high on Wednesday, buoyed by gains in comparative vegetable oils as investors positioned themselves ahead of a key agriculture report from the United States.

The US Department of Agriculture (USDA) will update its estimates of US corn and soybean crops late on Wednesday, and in the past, such reports have triggered sharp rallies by showing stocks or crops dramatically smaller than trade expectations.

December palm oil futures on the Bursa Malaysia Derivatives Exchange traded 1.9 percent higher at 2,855 Malaysian ringgit ($908) a tonne. It earlier hit a peak at 2,865 ringgit.

"Today the market is very strong on the back of yesterday's sharply higher complex, inclusive of soy oil," said a Kuala Lumpur-based trader.

"Maybe on an intra-day there's a bit of profit-taking going on but the market should be higher today on the US prices and the Dalian."

The US report could show a rise in soybean stocks, which could mean larger supplies of a competing edible oil.

Traded volumes for the palm oil December contract stood at 5,326 lots of 25 tonnes each compared with 12,761 lots on Tuesday.

US soyoil for Dec delivery was little-changed in Asian trade, after hitting a two-week high in the previous session. China's most active May 2012 soybean oil contract gained.

"The upward movement seen in the Dalian soybean market today was driven by the big gains in CBOT," a Kuala Lumpur-based analyst said. "The USDA report tonight is also an influencing factor as traders are cautious ahead of the report."

Benchmark palm oil has lost about 25 percent so far this year however, and hit a one year low at 2,754 ringgit late last week.

Behind the declines are persistent concerns about the health of the global economy and the uncertain commodities demand outlook.

Asian shares fell on Wednesday on concerns Europe's debt crisis has hurt confidence in the global economy and is weighing on corporate earnings, while the Slovak parliament's rejection of a plan to expand the euro zone rescue fund added to uncertainty.

Reuters analyst Wang Tao said palm oil is expected to fall to 2,818 ringgit per tonne, as it faces a strong resistance at 2,863 ringgit.

But palm oil prices rose for a third straight session in a row on Wednesday, as rising export data offset strong inventory numbers earlier this week.

Cargo surveyor Intertek Testing Services reported a 31.8 percent jump in Malaysian palm oil exports in Oct. 1-10 to 496,918 tonnes from the same period a month ago. Crude palm oil shipments alone were up 63.3 percent.

Top buyer China needs to restock after the national day holidays in early October and India is still buying ahead of Diwali at the end of the month.

Buyers of Indonesian crude palm oil however, are buying Malaysian grade after Jakarta made refined palm oil export taxes lower than crude, leading to bigger than expected shipments out of Malaysia.

In related markets, brent crude fell on Wednesday, snapping five days of gains, after OPEC cut a global oil demand forecast and plans for greater powers for a euro zone bailout fund hit a snag, rattling investor confidence.

Copyright Reuters, 2011