Malaysian crude palm oil futures hit a one-week high on Wednesday as traders priced in heavy rains cutting into this month's output. Palm oil has gained for three straight sessions as investors favoured commodity assets as a hedge against rising inflation in China and India, which has also helped weather-driven rallies in soyabeans and corn.
-- Weather, inflation concerns lift palm oil to 1-week high
-- Vegetable oil production seen tight in SE Asia, S.America
"The palm oil market is getting stronger on weather and inflation concerns, demand has been rather resilient in December," said a trader with a foreign commodities brokerage. Benchmark March 2011 crude palm oil futures on the Bursa Malaysia Derivatives rose as much as 2.1 percent to 3,635 Malaysian ringgit ($1,159), a level unseen since December 15. The contract later settled at 3,621 ringgit.
Traded volumes stood at 17,475 lots of 25 tonnes each compared to the usual 10,000 lots. Traders said palm oil may hit 4,000 ringgit by next month if the La Nina-driven rains continue to pound estates in Malaysia and Indonesia and the weather condition's dry spell cuts into soyabean yields in Argentina.
Rising food prices on tight supplies as well as ample liquidity are fuelling inflation worries. India, the world's largest vegetable oil importer, has warned that inflation was still well above its comfort levels. Annual headline inflation for No 2 buyer China reached 5.1 percent for November, a 28-month high and, putting pressure on Beijing to tighten monetary policy.
Oil prices, which edged up towards $90 on a cold snap in United States and Europe as well as low inventories, also supported vegetable oil markets. US soyaoil for January delivery edged up 0.3 percent as investors continued to assess news that hot weather and scanty rains in Argentina will curb soya output. The most active September 11 soyaoil on China's Dalian Commodity Exchange gained 0.4 percent.
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