Malaysian palm oil hits new one-week high

Malaysian crude palm oil futures hit a one-week high on Thursday, as China announced plans to restock agriculture commodities at a time when erratic weather globally may curb supplies. US soyoil for January delivery hit a 28-month high during Asian trade, as prospects of growing China demand extended gains in a market already rising on higher biofuel mandates in South America.
China said on Wednesday it will take a bigger role in importing food staples to shore up reserves of soybeans and corn, which has boosted grains and spilled over to vegetable oil markets. Big buyers such as China are moving in at a time when hot weather may curb soy and corn production in South America and rains have started limiting palm oil output in Malaysia and Indonesia.
"The weather story now includes a China story, which will see gains across most the of the agricultural complex," said a trader with a foreign commodities brokerage. "The cold weather in the US is also lifting commodities indirectly via crude oil's rally above $90 a barrel."
Benchmark March 2011 crude palm oil futures on the Bursa Malaysia Derivatives rose 1.2 percent to 3,665 ringgit ($1,170), a level unseen since December 15. By midday, the contract traded at 3,657 ringgit. Traded volumes stood at 7,184 lots of 25 tonnes each compared to the usual 5,000 lots.
Palm oil is set for its best weekly performance in December, as investors are increasingly favouring agricultural commodities as an inflation hedge since food prices in China and India have been high. US soyoil rose as much as 0.7 percent to 56.34 cents per pound, the highest since August 1, 2008. A strike by soy processing plant workers in Argentina, the world's top soyoil supplier, fanned more concerns on supply that is set to tighten on dry weather limiting soy yields.
The most active September 11 soyoil on China's Dalian Commodity Exchange jumped 2.2 percent on buoyant external markets although analysts said gains may be limited in the future. "Higher imports will definitely pressure soybean and soyoil prices in China, which is in line with the government's plan to curb price hikes," said an oil analyst with a Shanghai-based brokerage.