Malaysian palm oil futures rose to a fresh two-week peak on Thursday, supported by a softer ringgit and expectations seasonally lower supply may be tighter due to the El Nino dry weather pattern. Benchmark palm oil for January delivery on Bursa Malaysia Derivatives Exchange hit a session high of 2,386 ringgit ($557.48) a tonne, the loftiest since October 6.
It closed 0.2 percent higher at 2,371 ringgit, after gaining 4 percent in the previous two sessions. Top producer Indonesia this week cut its crude palm oil output estimate for next year to 33 million tonnes from an earlier projected 33.5 million tonnes, citing El Nino which could strengthen until December. In No 2 producer Malaysia, "we are entering low production months up to February, but with El Nino, the effect can be more pronounced," said a Kuala Lumpur-based trader.
Export demand for Malaysian palm oil tends to soften in November and December during winter in major consuming countries such as China, he said, adding prices could trade between 2,300 ringgit and 2,400 in the near term, barring an El Nino supply shock. Despite seasonally higher production growth in the third quarter, Nomura analysts say they expect plantation companies in Southeast Asia to report weaker earnings for the quarter as average selling prices dropped 7.2 percent year on year during the period. "We expect flat crude palm oil prices in 2015-16. Our preference is for (companies) with strong production growth and efficient cost control," they said. In other vegetable oil markets, US December soyoil gained 0.6 percent in late Asian trading and January soybean oil on the Dalian Commodity Exchange climbed 1.9 percent.
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