Palm Oil Climbs as Soybeans, Soyoil Rally on Weakening Dollar

By Thomas Kutty Abraham

Dec. 7 (Bloomberg) -- Palm oil gained, advancing to a six- month high for a second session, as soybeans rallied on a declining dollar and on speculation that output in Malaysia, the second-biggest producer, has been affected by rains.

Soybeans and soybean oil gained in Chicago as the dollar weakened, boosting the appeal of U.S. supplies, and on sustained demand from China. The Dollar Index, which tracks the value of the greenback against six major currencies, fell as much as 0.5 percent after jumping 1.7 percent on Dec. 4.

February-delivery palm oil added as much as 1.7 percent to 2,606 ringgit ($768) a metric ton on the Malaysia Derivatives Exchange, the highest intra-day level since June 5. The most- active contract was at 2,576 ringgit at the 3:48 p.m. in Kuala Lumpur.

“Palm oil is being influenced by the sharp increases in soybean oil and gains on the Dalian exchange,” Donny Khor, senior vice president for futures & options at OSK Investment Bank Bhd., said by phone from Kuala Lumpur today. “The market is quite bullish and could be headed even higher.”

September-delivery palm oil traded on the Dalian Commodity Exchange surged as much as 4.4 percent to 7,182 yuan ($1,052) a ton, the highest level in 15 months. The commodity last traded at 7,104 yuan.

January-delivery soybean oil jumped as much as 2.3 percent in Chicago today and last traded 2 percent higher at 40.92 cents a pound.

Palm oil prices surged 3.4 percent on Dec. 4 after Dorab Mistry, director of Godrej International Ltd., one of India’s biggest edible oil buyers, said palm oil may soar to 3,000 ringgit a ton by March.

Heavy Rain

Palm oil may extend the current rally to test this year’s high of 2,799 ringgit a ton, reached in May, Khor said.

“Heavy rainfall in parts of Malaysia in November is likely to result in a temporary reversal of the cyclical pick-up in yields and production” of palm oil until January, Alain Lai, an analyst at UBS Group AG, said in a report today.

Lai raised his forecast for next year by 19 percent to an average of 2,244 ringgit a ton. The price has averaged 2,209 ringgit this year.

Palm oil, used in cooking and as an alternative fuel, has jumped 52 percent this year as investors bought commodities as a haven from a declining dollar.

The premium of soybean oil over palm oil in Malaysia widened 10.2 percent to $144.02 a ton today, from $129.4 on Dec. 4, according to Bloomberg data.

To contact the reporter on this story: Thomas Kutty Abraham at tabraham4@bloomberg.net