JAKARTA: Malaysian crude palm oil futures rose to a six-week high on Tuesday, buoyed by strong crude prices and expectations of lower output in Southeast Asian producers due to wet weather.
Benchmark March palm oil futures on the Bursa Malaysia Derivatives Exchange ended 1.6 percent higher at 3,225 Malaysian ringgit ($1,000) per tonne. Prices earlier touched 3,244 ringgit, the highest level since November 21.
"Grains are leading on South American hot and dry weather plus crude oil," said a Kuala Lumpur-based trader.
"January to March are also seasonal months for lower output and big funds are backing the bullish trend," he added.
Traded volumes for the March palm contract were at a near two-week high at 12,983 lots of 25 tonnes each, compared with 7,766 on the last trading session on December 30.
Indonesia and Malaysia, the world's top two producers of palm, are currently in their monsoon season. Traders say this could impact output and prices during the first quarter.
"Weather looks bad everywhere," said a Jakarta-based trader. "Here too wet and South America too dry."
The Malaysian Meteorological Department sees heavy rains in Pahang and Sabah over the coming weekend, which may trigger some floods in these regions that account for about 40-50 percent of national production.
A second Kuala Lumpur-based trader saw prices at 3,100-3,350/3,400 ringgit in the first half.
"Stocks should begin to decline (and) production is likely to only pick up from February or March onwards."
Crude oil rose above $109 a barrel as tension between Iran and the United States stirred worries over a possible disruption to oil supplies and as Chinese data showed economic activity increasing.
US corn futures jumped to a seven-week peak before the new year holidays, ending a volatile year with the third straight annual gain, as concerns mounted about hot, dry weather hurting output in Argentina, the No. 2 exporter of the grain.
China's Dalian commodity exchange was closed for holidays.
In 2011, palm oil posted its first annual decline since 2008 -- down more than 16 percent, versus a 42 percent gain in 2010.
Helping push palm prices lower last year was global economic uncertainty and the euro zone debt crisis, which also pushed other commodities lower.
On Tuesday, better-than-expected data from China's giant manufacturing sector boosted global stocks and the euro on Tuesday and pushed safe-haven bets like German bonds lower.
"For the first quarter of 2012, it is more bullish and I'm looking at prices rising to the 3,300 ringgit level," said Ker Chung Yang, investment analyst at Phillip Futures in Singapore.
"Firstly, it is on the weather issue and we're going to see harvesting being disrupted due to heavy rains.
"There are some challenges to this ... we see the export figures from Malaysia were disappointing and we expect them to continue to come down."
Exports of Malaysian palm oil products for December fell 2.6 percent to 1,493,128 tonnes, cargo surveyor Intertek Testing Services said on Saturday.
Fellow cargo surveyor Societe Generale de Surveillance said exports of Malaysian palm oil products for December fell 3.3 percent to 1,486,574 tonnes on Tuesday.
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