Palm Oil Rises as Discount to Soybean Oil Reaches Record High

By Feiwen Rong

Aug. 29 (Bloomberg) -- Palm oil gained as the discount to rival soybean oil reached a record high, triggering buying from investors looking for a bounce in prices of the tropical oil.

Palm oil has declined 18 percent this year, while soybean oil has gained almost 10 percent after supply from Argentina, the world's largest exporter, was curbed during a four-month strike by farmers over the March increase in export taxes.

Crude palm oil is $470 a metric ton cheaper than soybean oil, Sunaina Dhanuka, analyst at Macquarie Securities, said yesterday in a report. The discount relative to both soybean and rapeseed oils is at an ``all-time high,'' she said. ``We therefore, expect palm oil prices to rebound in the short-term.''

Palm oil for November delivery gained by as much as 2.5 percent to 2,531 ringgit a ($746) a ton in Kuala Lumpur before trading at 2,511 ringgit at 11:26 a.m. local time. The contract reached record 4,486 on March 4.

Still, prices may not exceed $1,000 a ton in the medium term due because of a favorable supply outlook, Dhanuka added.

Palm oil, the world's most consumed vegetable oil, fell more than 9 percent this week before today amid expectations supplies from Indonesia and Malaysia, the biggest producers, would exceed demand. Indonesia may produce more than 19 million tons this year and Malaysia more than 17.4 million tons, Dorab Mistry, director at Dodrej International Ltd., said Aug. 25.

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To contact the reporter on this story: Feiwen Rong in Singapore at frong2@bloomberg.net