Malaysian palm oil futures rise

Malaysian palm oil futures rose 0.7 percent on Friday on concerns that earlier floods and rains could further weaken yields at a time of strong demand despite prices logging their weakest weekly gain in two weeks. Traders expect continued tightening in vegetable oil supplies on strong export demand from China and a possible shift in US farming acreage this year to more lucrative corn from soybeans, an oilseed crushed into competing soyoil.
"For Malaysia, the stock draw will be more pronounced in February, as China will have to replenish after the Lunar New Year holiday and its a much shorter month for harvesting from oil palms," said a trader with a foreign brokerage. The benchmark April crude palm oil contract on the Bursa Malaysia Derivatives Exchange rose 29 ringgit to 3,955 ringgit ($1,299). The previous day, the market hit 3,967 ringgit, a level not reached since March 2008.
Overall volumes more than doubled to 22,982 lots at 25 tonnes each, compared to the usual 15,000 lots. But technicals pointed to further declines. A Reuters analysis showed palm oil will retrace further to 3,835 ringgit per tonne, as a correction has not been completed after a five-wave cycle topped 3,967 ringgit. The supply-demand scenario for palm oil remains bullish. Cargo surveyors reported more than 40 percent jump in Malaysia's palm oil exports in February 1-10 versus the same period a month ago. The Malaysian Palm Oil Board reported on Tuesday of falling production as floods and rains disrupted deliveries and stalled harvesting, cutting January stocks to a six-month low.
In contrast, forecasts for improved crop weather in key soybean-producing areas of South America may pressure the soybean complex, including soyoil. Plentiful rains in January improved Argentina's 2010/11 soy crop and the output outlook is stable at 47 million tonnes, Buenos Aires Grains Exchange said Thursday. The most active September soyoil contract on China's Dalian Commodity Exchange fell 0.5 percent, with selling pressure coming from the government making plans to offer 100,000 tonnes of rapeseed oil in its regular sale next week. US soyoil for March delivery rose 0.5 percent in Asian trade.