Palm jumps nearly 3% to 5-week high on tight supply concerns
- Slow output growth to limit Malaysia's stockpile until Q3
- End-July stocks seen up 3.4%, output 5% higher
KUALA LUMPUR: Malaysian palm oil futures rose as much as 3.2% on Tuesday, touching its highest in five weeks, on persisting concerns over tight supply of palm and rival edible oils amid hopes of an improvement in export shipments.
The benchmark palm oil contract for September delivery on the Bursa Malaysia Derivatives Exchange closed up 114 ringgit, or 2.95%, to 3,977 ringgit ($948.94) a tonne, its highest closing since June 8.
Data released by the Malaysian Palm Oil Board on Monday showed end-June inventories rose by 2.8% to a nine-month high of 1.61 million tonnes, meeting the lower end of expectations.
However, inventories were 15% lower than the year-ago level, and the tightness will likely remain until the third quarter due to slow output growth, MIDF Research said in a note.
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End-July stockpile is projected to rise 3.4% month-on-month to 1.67 million tonnes, with production rising by 5% and exports up by 2%, Ivy Ng, regional head of plantations research at CGS-CIMB Research, said in a note.
Prices will remain firm in the range of 3,400-4,000 ringgit a tonne amid low global edible oil inventories and palm's wide discount of $350/tonne against soybean oil, she said.
Inventories in key buyer China are at a three-year low and would spur replenishment activities, while exports to India are expected to rise towards the end of July, Adrian Kok, an equity analyst at Kenanga Investment Bank, said in a note.
The U.S. Department of Agriculture left its U.S. soy production estimate unchanged from June at 4.4 billion bushels. Analysts, who had been expecting a slight decline, said the crop could still suffer from unfavourable weather.
Soyoil prices on the Chicago Board of Trade were up 2.7%. Dalian's most-active soyoil contract rose 1.2%, while its palm oil contract fell 0.4%.
Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.
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