Palm oil rises

Malaysian crude palm oil futures climbed to a near five-week high on Wednesday as dry weather in South America sparked concerns about lower soybean yields, potentially tightening soyoil supplies. Despite the rise, prices of the tropical oil are still on course for their first annual decline since 2008 on worries the eurozone debt crisis could stall economic growth and commodity demand.
"In the short term, the eurozone debt crisis will fade from palm oil traders' focus," said a trader with a foreign commodities brokerage in Kuala Lumpur. Benchmark March palm oil futures on the Bursa Malaysia Derivatives Exchange settled up 0.8 percent at 3,185 ringgit ($1,000) after going as high as 3,205 ringgit - a level unseen since November 22.
Traded volumes for palm oil futures were surprisingly strong ahead of the new year holidays with 27,216 lots of 25 tonnes each, compared to the usual 25,000 lots. Traders said market players were likely squaring off their books ahead of time.
Dealers were also eyeing weather developments in Malaysia, the No.2 producer of the vegetable oil where regularly issued data may show signs of heavy rains affecting production. So far, planters have reported some disruption in deliveries of crude palm oil to refineries and ports in southern Johor state that accounts for at least 20 percent of national output.
"Production in Johor is down but it is really not so bad in other parts of Malaysia such as Sabah. I would not be too surprised, once you balance the numbers, if we get a tiny gain in output this month," said another trader in Kuala Lumpur. Palm oil production in Malaysia is now in the seasonally low yield phase and many planters and traders expect stock levels to come down although the pace of the decline depends on the export trend. Exports have moderated after exceptionally strong growth in July and August, potentially easing any tightness in stocks.
Cargo surveyors reported more than an 11 percent drop in Malaysian exports in December 1-25 from a month ago as China and India slow shipments for the year end. US soyoil for January delivery fell 0.4 percent in Asian trade after posting strong gains in the previous session. The most active September 2012 soyoil contract on China's Dalian commodity exchange rose nearly 1 percent.