Palm oil gained for a second day, driven by a rebound in soybean prices and concern that oilseed harvests from Canada and China may be hurt by bad weather, potentially tightening global supplies. Palm oil for September delivery, the most-active contract, climbed as much as 0.4 percent to 2,393 ringgit ($744) a metric ton, before ending at 2,390 ringgit at the 12:30 p.m. break on the Malaysia Derivatives Exchange. November-delivery soybeans advanced as much as 0.4 percent at $9.275 a bushel in Chicago. Palm oil is the world’s cheapest edible oil, and the rival oil crushed from soybeans is a direct substitute for use in food and biofuels. Together the two oils comprise more than 60 percent of the world’s edible oils. There are short-term concerns amid adverse weather conditions, said Ben Santoso, a plantation analyst at DBS Vickers Securities (Singapore) Pte, referring to global supplies of oilseeds. Rapeseed output in China, the largest user, may be as much as 15 percent smaller than estimated, which will help support soybean oil, Jerrod Kitt, an analyst at commodity researcher and brokerage Linn Group, said yesterday. Output may be 1.5 million to 2 million tons smaller than the 13 million tons forecast by the U.S. Department of Agriculture on June 10, Kitt said. Wet Weather The reduced output in China may help push rapeseed stockpiles below the 2007-2008 level, as Canada, the largest exporter, was forecast to lose 2 million tons of production in the 2010-2011 season on persistent wet weather, Kitt said. Canada accounts for 60 percent of global rapeseed shipments. The “significant deterioration” of prospects for the Canadian canola crop is bullish for rapeseed and canola, OilWorld said in its June 18 weekly report. It may also help soybean oil, the industry publication said. India’s monsoon, the main source of irrigation for the nation’s 235 million farmers, is 11 percent below average so far this season, the Meteorological Department said today. India’s oilseed crops include soybeans and groundnuts. Still, supply concerns will ease within weeks as South American soybeans replenish stockpiles, and palm oil prices may decline in the second half, Santoso of DBS said by phone. The short-term supply concerns had pushed Malaysia palm olein to a premium over degummed Argentina soybean oil, Santoso said. Malaysia palm olein traded at $803.50 a ton on June 22, while Argentina soybean oil was at $791.23 a ton yesterday, according to Bloomberg data. Palm oil prices may drop as a record soybean crop is “mildly bearish” for the tropical oil, Maybank Investment Bank Bhd. analyst Tan Chi Wei said today in a report. Palm oil may average 2,250 ringgit in the second half, he said. Prices have averaged 2,524 ringgit this year, according to Bloomberg data. The U.S., Brazil and Argentina are the largest producers of soybeans, and a record harvest is forecast this year after drought ravaged the South American crop last year. Soybean oil for December delivery in Chicago gained 0.5 percent to 38.73 cents a pound, trimming this year’s loss to 5 percent. Palm oil has dropped 10 percent. To contact the reporter on this story: Claire Leow in Singapore at cleow@bloomberg.net

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