Palm oil rises

Malaysian crude palm oil futures inched up on Wednesday as prospects of lower edible oil output in South America and Southeast Asia offset worries over the eurozone debt crisis. Investors remained cautious ahead of the Spanish and Italian debt auctions on Thursday and Friday as any signs of the debt crisis worsening could lower global economic growth and commodity demand.
But concerns of dry weather in South America and heavy rains in Southeast Asia potentially hurting output could boost palm oil futures that are up more than 1.5 percent so far this year. Gains were however limited by Malaysian's opening palm oil stocks for 2012 that stayed above the psychological level of 2 million tonnes.
"Traders are mainly still in a puzzle mode over the bearish MPOB data. They will be looking for the USDA report to drive the market," said a dealer with a foreign commodities brokerage in Kuala Lumpur, referring to the US Department of Agriculture report due Thursday. Benchmark March palm oil futures on the Bursa Malaysia Derivatives Exchange erased earlier losses to close 0.6 percent higher at 3,233 ringgit ($1,030) per tonne.
Traded volumes were thin at 16,062 lots of 25 tonnes each, compared to the usual 25,000 lots, as investors were waiting for further cues. Palm oil is expected to fall below 3,176 ringgit per tonne according to technical charts, said Reuters market analyst Wang Tao. Malaysian Palm Oil Board said on Tuesday that Malaysia's December palm oil stocks fell 1.5 percent from a month ago, better than expectations of a 5.7 percent decline based on a Reuters survey.
"The larger-than-expected stockpile is slightly negative for CPO price as it suggests that supplies are not as tight as expected," said CIMB analyst Ivy Ng in a research report. The US Department of Agriculture will issue January world crop reports which traders expect to show downgrades of South American crop forecasts.
The Malaysian weather office did not issue any flood warnings but the industry is keeping a close watch as heavy rains may disrupt palm oil production. US soyoil for March delivery eased 0.4 percent from an earlier weather-driven rally while the most active September 2012 soyoil contract on China's Dalian commodity exchange were almost flat.