Palm Oil Climbs to a Six-Week High on Export Demand From India.

Palm oil had the best winning run since February to reach a six-week high on speculation demand for the most-consumed vegetable oil will increase as India and other populous Asian nations approach the festival season.

September-delivery futures rose for a seventh day, adding 1.3 percent to 2,470 ringgit ($770) a metric ton on the Malaysia Derivatives Exchange. The price reached 2,480 ringgit intraday, the highest since June 4.

“We expect demand to pick up as soybean oil’s premium is increasing and demand for Ramadan and Deepavali event will begin,” Herman Koeswanto, an analyst at PT Andalan Artha Advisindo Sekuritas in Jakarta, said in a report today.

China, India, Pakistan and Indonesia mark their important festivals in the quarter ending September, with communal meals stoking edible oils consumption.

Soybean oil rallied for a sixth day to 39.48 cents a pound, lifting its premium over palm oil to $100.41 a ton from a low of $56.47 a ton on April 30 this year, according to Bloomberg data. The two oils are direct substitutes.

Greater-than-expected exports of palm oil from in Malaysia, the second-largest producer, pared June stockpiles to a 10-month low of 1.45 million tons, the country’s Palm Oil Board said this week. Exports rose 5.5 percent to 1.44 million tons, exceeding estimates by Intertek and Societe Generale de Surveillance.

Overseas sales rose 11 percent to 668,573 tons in the first 15 days of July as an increase in orders from India and the subcontinent made up for a drop in sales to China, Intertek said yesterday. Purchases by India and the subcontinent surged to 160,040 tons from 62,202 tons in the same period in June.

Supply Shortage

“In our view, India will need incremental supplies to meet domestic demand since there’s lack of supplies locally due to lower rainfall,” Koeswanto said.

India is the top buyer of palm oil, using it to supplement local production of oils from soybeans, groundnuts, cottonseeds, and other oilseeds. The country’s monsoon rains were 24 percent below normal last week, and 14 percent below average since the season began on June 1, the weather office said yesterday.

Earlier this week, Govindlal G. Patel, director of Dipak Enterprise, a trader of vegetable oils, forecast Indian demand would rise. Imports of palm and soybean oils in the quarter to Oct. 31 may be 2.6 million tons, 24 percent higher than a year earlier, Patel said July 13.

September-delivery soybean oil rose 1.2 percent yesterday, while soybeans for November delivery climbed 2.7 percent to $9.88 a bushel on the Chicago Board of Trade.

CME Group Inc.’s September-delivery palm oil contract, pegged to the Malaysian benchmark price, added 8 percent to $763.75 a ton yesterday, the most since the contract started trading in May.

On the Dalian Commodity Exchange, January-delivery palm oil advanced 2.2 percent to 6,538 yuan ($965) a ton.

Source : Business Week