Palm Oil Advances to Six-Month High on Crude, Lower Stockpiles

By Claire Leow

April 9 (Bloomberg) -- Palm oil rose to a six-month high as commodities including crude oil rallied and stockpiles of the vegetable oil declined in Malaysia, the second-largest producer.

Crude oil, leads palm oil as the tropical commodity is often used in biofuels, rose as much as 4.2 percent. Malaysian palm oil stockpiles fell for a fourth month in March to about 1.5 million tons, Minister of Plantation Industries and Commodities Peter Chin said on April 7.

“The crude palm oil pricing up-cycle would sustain,” said an AMResearch Bhd. report today that raised its average forecast for this year and 2010. “There is a possibility that palm oil inventory could touch a low of 1.3 million tons by the year- end,” from a record 2.27 million tons in November.

June-delivery palm oil on the Malaysia Derivatives Exchange rose 104 ringgit, or 4.8 percent, to 2,269 ringgit ($628) a ton in Kuala Lumpur, the highest since Sept. 26. Futures have gained for seven weeks.

AMResearch, which also said a weak U.S. dollar would support higher palm oil prices, raised its average forecast by 25 percent to 2,500 ringgit a ton this year, and 17 percent to 2,700 ringgit for 2010. Palm oil has averaged 1,928 ringgit a ton this year.

Chin’s comment “is adding to the buoyancy,” Ben Santoso, an analyst at DBSVickers Securities, said. Malaysia’s palm oil board may announce monthly data tomorrow or on April 13.

Indonesia and Malaysia account for about 90 percent of the world’s palm oil, also used in foods. While Indonesia doesn’t announce monthly stockpile data, Sahat Sinaga, executive director at the Indonesian Confederation of Vegetable Oil Industries, said in March that stockpiles held by producers and at ports probably declined to 1.3 million tons from 1.5 million tons in February.

China Tariffs

Still, China, the biggest user of vegetable oils, indicated today it may raise a tariff on shipments of soybeans, crushed to produce an oil that competes with palm oil.

China’s dependence on imported oilseeds is “too high,” increasing the risks to the nation’s food security, He Yanli, deputy director of industries at the National Development and Reform Commission, said in Beijing.

The nation is buying oilseeds “from their own farmers to keep them quiet and build reserves,” Santoso said. “Demand from China will be muted,” potentially reducing global prices for palm oil and soybeans, he said.

Soybeans may fall to $7.40 a bushel, Santoso forecast, which may drag down palm oil prices. Soybeans futures for May delivery in Chicago were at $10.23 at 6:06 p.m. in Singapore.

“Palm oil cannot trade at a premium to soybean oil,” he said. “The outlook for the next six months is bearish.”

Soybean oil for May delivery was at 35.44 cents a pound at 6:06 p.m. in Singapore, 24 percent premium to palm oil, according to data on the Bloomberg.

To contact the reporter for this story: Claire Leow in Singapore at cleow@bloomberg.net