Malaysian crude palm oil recovered on Thursday, driven by erratic weather slowing production in major vegetable oil exporting regions at a time of growing global demand. Palm oil prices were also supported by the rally in other agriculture markets on Wednesday that stoked fears of rising food prices.
The United Nation's food agency said food prices hit a record high last month, outstripping levels that triggered riots in 2008.
Palm oil clawed back most of its day-ago losses despite a firmer dollar, as rains continued to pound estates in Indonesia and Malaysia, stalling harvesting and tightening supplies. But traders said news that Thailand will imports 30,000 tonnes of crude palm oil, the first in three years and possibly from Malaysia to plug a domestic shortfall, had minimal impact on the market due to the small size.
Soyoil-producing Argentina got some rains, giving the crop some respite from the dry weather but traders said it was not enough to help during the critical pod-setting period.
Concerns about tight grains and vegetable oil supplies across the world have kept markets on edge ahead of a slew of industry reports. Malaysia's palm oil stocks data and USDA monthly supply and demand report are due next week.
The benchmark March 2011 crude palm oil contract on Bursa Malaysia Derivatives rose 1.5 percent to trade at 3,864 ringgit ($1,259.452) per tonne.
Traded volumes rose to 20,333 lots of 25 tonnes each, compared to the usual 15,000 lots.
Concerns of tight palm oil supplies in Malaysia due to the rains have lifted cash prices, prompting traders to ship in cheaper, more ample variety from Indonesia for Malaysia's refining industry.
A Reuters poll showed that Malaysian palm oil stocks fell to a five-month low on laggard production and still-resilient demand.
Crude oil held above $90 on Thursday on upbeat private US payroll data, which helped support vegetable oil markets.
US soyoil for January delivery rose 0.7 percent in Asian trade hours, extending gains in the previous session as tight supplies, signs of further economic recovery and strong Chinese demand boosted sentiment. The most active Sept 2011 soyoil on China's Dalian Commodity Exchange rose 2.6 percent.