Palm oil inches up, set for 2nd straight weekly gain

KUALA LUMPUR: Malaysian crude palm oil futures edged higher on
Friday, heading for a second straight weekly gain as global oilseed
supply fears and rising export demand supported prices. A crop tour
continued to give evidence of the devastation caused by the U.S. grain
belt's worst drought in half a century which has lifted soybean prices
to all-time highs in recent weeks. Fears of a tighter soybean oil
supply has led to a shift in vegetable oil demand to the cheaper palm
oil. Corn and soy fields in Iowa, the No.1 growing state for both
crops, have fallen victim to the historic drought and is expected to
drag national yields below the government's latest projections,
according to the Pro Farmer Midwest Crop Tour. "The market is trying to
catch up with soyoil, especially as its premium over palm oil is at
more than $250 per tonne," said a trader with a foreign commodities
brokerage in Malaysia. "Exports should improve further. The market has
further room to move higher, it is still trading in a tight range of
RM3,050 to RM3,100." By the midday break, the benchmark November 2012
contract on the Bursa Malaysia Derivatives Exchange gained 0.6% to
RM3,080 (US$994) per tonne. Prices hit a high of RM3,100 on Thursday, a
level last seen on July 17. Futures are on track to notch a close to 4
percent gain this week, the best weekly performance since April. Total
traded volumes were thin at 10,608 lots of 25 tonnes each, compared to
the usual 12,500 lots. Palm oil will consolidate in a range of RM3,044
to RM3,097 per tonne for one trading session before climbing up towards
3,183 ringgit, said Reuters market analyst Wang Tao.
Malaysia's
palm oil exports rose 6 percent for the Aug 1-20 period from a month
ago, according to cargo surveyor Intertek Testing Services, on higher
shipments to major food buyers China and India. Traders will be
watching for further indication on export trends as another cargo
surveyor, Societe Generale de Surveillance, releases its Aug 1-20 data
together with Aug 1-25 data on Monday. Planters are also concerned by a
possible return of El Nino to South East Asia as the hot and dry
weather pattern could hurt oil palm yields for major producers
Indonesia and Malaysia. Brent futures fell below US$115 per barrel in
Asia on Friday on signs of economic weakness across the globe, while
doubts about more easing by the Federal Reserve and renewed worries
over Europe's debt crisis also weighed. Other vegetable oil markets
also traded higher on persistent U.S. dry weather fears. By 0431 GMT,
the most active U.S. soyoil contract for December delivery gained 0.5
percent and the most active January 2013 soyoil contract on the Dalian
Commodity Exchange edged up 0.2 percent. - Reuters