SINGAPORE :Malaysian palm oil futures jumped to a new more-than-a-year high on Monday after US government report showed farmers will plant less soybeans, setting the stage for tighter edible oil supply this year at a time of strong global demand.
The US Department of Agriculture said farmers would plant 2 percent less of soybean crop, sending soybean prices to a six-month high on Friday and now helping palm oil to cross 3,500 ringgit for the first time this year.
"This is good news for crude palm oil price in the near term as it could lead to a smaller soybean crop, which would mean less soybean oil," said Kuala Lumpur-based CIMB Investment Bank analyst Ivy Ng in a note to clients
"This may spark a price rally for crude palm oil in the second quarter and reinforces our trading buy call on the sector."
At 0331 GMT, Benchmark June palm oil futures on the Bursa Malaysia Derivatives Exchange gained 2.2 percent at 3,508 ringgit ($1,148) per tonne. Prices went as high as 3,510 ringgit, a level unseen since March 10 last year.
Traded volumes stood at around 6,000 lots of 25 tonnes each, half of the usual 12,500 lots expected in the morning session as some dealers remained cautious.
Yet traders and analysts expect palm oil prices to get a further boost from the drought in soy-exporting South America, which has withered crops.
"We think global soybean supply will still be very tight this year given steady deterioration of the soybean crops in South America, especially Brazil, due to droughts," said Alan Lim, an analyst at Kenanga Investment Bank.
"Crude palm oil prices will benefit from this as it is commonly used as substitute to soybean oil," he added.
Export demand for palm oil has been picking up in Malaysia after four straight months of declines. March palm oil exports rose 4.8 percent, according to cargo surveyor Intertek Testing Services.
Another cargo surveyor Societe Generale de Surveillance will release export data for the month later in the day.
Oil rose on Friday to post the biggest quarterly gain since the beginning of 2011 as the growing threat of a disruption of Iranian exports added to supply concerns.
In other vegetable oil markets, the most active US soyoil contract for May gained 0.4 percent in Asian trade, supported by the bullish USDA report.
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