Palm Oil Extends Last Week's Rally on Weather Outlook, Indonesian Exports.

Palm oil advanced on concern that the La Nina weather event may disrupt harvests in the biggest producers of the commodity later this year, and as a gain in crude oil lifted the appeal of vegetable oils used in biofuels.

October-delivery futures climbed as much as 1.1 percent to 2,525 ringgit ($791) a metric ton on the Malaysia Derivatives Exchange. The most-active contract paused at 2,505 ringgit at the midday break in trading. Prices gained 1.1 percent last week.

“There’s an expectation of disruption to palm oil output because of La Nina weather in the second half of this year,” said Ryan Long, a trader at OSK Investment Bank Sdn. “Weather concerns along with strength in external markets like crude oil is adding to the bullish sentiment.”

Palm oil exports from Indonesia, the largest producer, rose 9 percent in June, gaining for a second month, as buyers sought to rebuild inventories ahead of a Muslim festival, according to an industry group. Shipments climbed to 1.13 million tons from 1.04 million tons in May, the Indonesian Palm Oil Association said on July 24. Sales to India, the biggest buyer, jumped 45 percent to 476,030 tons, said Gapki, as the group is known.

China, India, Pakistan and Indonesia mark important festivals in the quarter ending September, with communal meals stoking edible oils consumption. Malaysia’s exports increased 5.5 percent to 1.44 million tons in June, beating estimates by cargo surveyors Intertek and Societe Generale de Surveillance.

Goldman Sachs Group Inc. last week forecast crude palm oil for immediate delivery would gain 15 percent to 20 percent this year after dry weather hurt Malaysian production.

Malaysian Shipments

Malaysia’s palm oil exports fell 4.1 percent in the first 25 days of July to 1,074,329 tons from 1,120,563 tons in the same period in June, independent market surveyor Intertek said.

“The market has already factored in a drop in Malaysian exports this months and that’s why prices didn’t react to the news of the exports decline.”

Crude oil for September delivery traded at $79.11 a barrel, up 13 cents, on the New York Mercantile Exchange at 12:43 p.m. Singapore time. Futures are up 16 percent from a year earlier.

December-delivery soybean oil added 0.2 percent to 39.84 cents and the vegetable oil’s premium over palm oil narrowed to $92.4 a ton from $95.08 on July 23, according to Bloomberg data.

CME Group Inc.’s October-delivery palm oil contract, pegged to the Malaysian benchmark price, rose 1.1 percent to $786 a ton.

On the Dalian Commodity Exchange, January-delivery palm oil jumped as much as 1 percent to 6,696 yuan ($988) a ton, while soybean oil advanced 0.8 percent to 7,686 yuan a ton.

Source : bloomberg.com