BLBG: Palm Oil Gains to Six-Month High as Oil Rises, Stockpiles Drop
Palm oil futures advanced to the highest in more than half a year as commodities including crude oil rallied and stockpiles in Malaysia, the second-largest producer, dropped for a fourth straight month.
Crude oil, which can lead palm oil prices as the tropical commodity may be used in biofuels, gained as much as 1.7 percent in New York. Malaysian palm oil stockpiles fell in March to about 1.5 million metric tons, Minister of Plantation Industries and Commodities Peter Chin said on April 7.
“What Peter Chin said is adding to the buoyancy,” said DBSVickers Securities analyst Ben Santoso. Malaysia’s palm oil board may announce monthly data tomorrow or on April 13. Inventories reached a record 2.27 million tons in November.
Palm oil for June delivery on the Malaysia Derivatives Exchange rose as much as 2.8 percent to 2,225 ringgit ($616) a ton in Kuala Lumpur, the highest intraday price since Sept. 29, and traded at that level at the 12:30 p.m. break.
Indonesia and Malaysia produce 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 fell in March to 1.3 million tons from 1.5 million tons in February, based on estimated shipments.
China Tariffs
Still, China, the biggest user of vegetable oils, indicated today it may raise a tariff on shipments of soybeans, which may be 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 commission is the country’s top economic planning agency.
The Asian nation is buying oilseeds “from their own farmers to keep them quiet and build reserves,” Santoso said from Singapore. “Demand from China will be muted,” potentially reducing international 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 in Chicago for May delivery traded at $10.1375 at 11:59 a.m. in Singapore.
“The outlook for the next six months is bearish for palm oil,” Santoso said. “Palm oil cannot trade at a premium to soybean oil.”
Soybean oil for May delivery in Chicago traded at 35.10 cents a pound at 12:43 p.m. in Singapore, a 26 percent premium to palm oil, according to Bloomberg data.
