Malaysian palm oil hits fresh 33-month highs

Malaysian crude palm oil futures rose to fresh 33-month highs on Tuesday, driven by prospects of erratic weather sapping vegetable oil supplies at a time when demand remains resilient. Heavy rains due to the monsoon season normally hamper the harvesting of palm fruits and make transportation to refineries difficult in the world's leading palm oil producers, Malaysia and Indonesia.
Dry weather in soya-producing Argentina has slowed plantings and could prevent soya crops from developing normally. "Palm oil production will fall more than 15 percent in this month as the weather is pretty bad in palm oil producing states," said a trader with a foreign brokerage in Kuala Lumpur. "But demand is going to improve by at least 10 percent next month as China gets ready for the Lunar New Year." The benchmark March 2011 crude palm oil contract rose 0.6 percent to 3,778 ringgit ($1,220.679) per tonne after hitting an intraday high of 3,792 ringgit - a level unseen since March 2008.
Overall traded volumes were 10,730 lots of 25 tonnes each, slightly above the usual 10,000 lots. Malaysian palm oil is expected to hover around 3,766 ringgit per tonne for one trading session before resuming its rally towards 3,840 ringgit, according to a Reuters technical analysis.
Cargo surveyor Societe Generale de Surveillance on Monday showed palm oil exports for December 1-25 dropped 23.7 percent to 1,040,145 tonnes, as demand from China, the world's No 2 vegetable oil buyer, almost halved. Exports from Indonesia, the world's top palm oil producer, also fell 1.9 percent to 1.17 million tonnes during December 1-25 compared to the same period last month, an Indonesian trader said. The most active September 2011 soyaoil on China's Dalian Commodity Exchange rose as much as 2 percent to a 29-month high of 10,662 yuan ($1,607.8) before paring some losses to trade at 10,606 yuan.
"Despite price control policies in China, soyaoil prices were up on soyabean supply concerns due to the La Nina driven dry weather in South America," said a Shanghai-based oil analyst. The news has prompted US soya futures to extend gains from the previous session and hit its highest in nearly 28 months in Asian hours. US soyaoil for January delivery rose 0.2 percent in Asian trade hours.