Palm oil hits 3-week high on exports, economy

But palm oil prices, which gained five percent last week, could come under pressure as a forecast for higher US soybean acreage could lead to a bigger crop for crushing into competing soyoil.

"Export data is supportive and the market is watching the euro zone issues. One camp is talking about how high exports may reduce palm oil stocks as output may have hit its peak this year," said a trader with a foreign brokerage in Kuala Lumpur.

"There is another school of thought saying stocks could hit 2.4 million tonnes at the end of the year. I think that may not happen," the trader added.

By midday, benchmark January palm oil futures on the Bursa Malaysia Derivatives Exchange rose 0.4 percent at 2,926 ringgit ($936) a tonne. It earlier traded at 2,946 ringgit -- the highest since Sept 27.

Traded volumes stood at 10,469 of 25 tonnes each, compared to the usual 12,500 lots.

Traders expect the market to range between 2,900 and 3,000 ringgit as investors closely watch a crucial week for the euro zone crisis that will see policy makers come up with a plan to resolve debt woes and recapitalise banks.

Export data is expected to strengthen in the coming weeks as mostly Muslim countries and China re-stock after major public holidays and India continues to buy ahead of Diwali at the end of this month.

Cargo surveyor Intertek Testing Services said over the weekend Malaysian exports for Oct. 1-15 rose 11.9 percent to 725,456 tonnes, driven by higher crude palm oil shipments.

"The buying of crude palm is going at a steady pace. Overseas buyers are flocking to Malaysia that has a tax free crude palm oil export quota," said another trader in Malaysia.

"Exporting Indonesian crude palm oil is expensive compared to that of refined palm oil and there is some opportunity for Malaysia," he added.

Buyers swooping in to buy Malaysia crude palm oil could cut stocks in the world's second largest producer of the vegetable oil that rose to a 21-month high in September and punched above 2 million tonnes.

Brent crude oil futures climbing towards $113 a barrel on Monday lent some support to vegetable oil markets.

But US soyoil for December delivery dropped 0.6 percent in Asian trade after Analytical firm Informa Economics raised its forecast of US 2012 soybean seedings to 77.0 million acres from its previous projection of 75.8 million.

China's most active May 2012 soybean oil contract climbed 0.5 percent on restocking demand after the Golden Week holidays in early October.

Copyright Reuters, 2011