Palm oil sees highest jump in a month to near 3-year high on lower output

• Palm prices had peaked at an intraday high of 3,008 ringgit, its biggest jump in a month and their highest price since Feb. 14, 2017.
• They have climb 41% so far this year, heading for their best annual performance in nearly a decade.
• Prices may reach 3,050 ringgit before the New Year as inventories will be much lower than forecast at an estimated 1.95 million tonnes.

KUALA LUMPUR: Malaysian palm oil futures surged past 3,000 ringgit to a near three-year high on Thursday, riding momentum from supply shortage worries as industry groups forecast a steeper-than-expected decline for December production.

The benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange closed up 80 ringgit, or 2.7%, at 3,003 ringgit ($726.94).

Palm prices had peaked at an intraday high of 3,008 ringgit, its biggest jump in a month and their highest price since Feb. 14, 2017.

They have climb 41% so far this year, heading for their best annual performance in nearly a decade.

The increase came as industry groups the Malaysian Palm Oil Association and Southern Peninsular Palm Oil Millers Association both predicted a sharp fall in production in December, at 16% and 27% respectively, from the month before, according to traders.

"This is a higher drop than the market's expectation of 13%-15% decline", said Anilkumar Bagani, research head of Sunvin Group, a Mumbai-based vegetable oil broker.

Prices may reach 3,050 ringgit before the New Year as inventories will be much lower than forecast at an estimated 1.95 million tonnes, said Marcello Cultrera, institutional sales manager at Phillip Futures in Kuala Lumpur.

Poor rainfall and lower fertiliser use in top producers Malaysia and Indonesia earlier this year are likely to curb yields of the tropical oil in the first half of 2020, according to traders and analysts.

Exports of Malaysian palm oil products for Dec. 1-25 fell between 8.5% to 12.8% from a month earlier, according to cargo surveyors.

However, domestic consumption is expected to increase in top producers Malaysia and Indonesia as both countries are pushing higher palm bio-content requirements in their 2020 bio-diesel programmes.

Dalian's most-active soyoil contract gained 0.4%, while its palm oil contract fell 1%. The Chicago Board of Trade was closed for Christmas.

Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.