Vegoils Palm ends near 1-wk high after weather warning triggers supply fears

by **Cals** Mon 28 Oct 2013, 19:37

Vegoils Palm ends near 1-wk high after weather warning triggers supply fears

Business & Markets 2013

Written by Reuters

Monday, 28 October 2013 19:01

28/10/13 18:53:40

(Adds closing prices, weather warning, quote)
* Prices jump to 2,483 rgt in late trade
* Weather concerns trigger rally in market - trader
* Currency rises as much as 1.1 percent on Monday
* B7 blend could raise Malaysia's biodiesel consumption to 700,000 T -analyst

KUALA LUMPUR (Oct 28) : Malaysian palm oil futures surged to a near one-week high on Monday, snapping three straight days of losses as warnings of wet weather fanned concerns that supply in the world's second-largest producer could wane earlier than expected.

Malaysia's meteorological department issued a notice on its website late on Monday, warning of "thunderstorms and heavy rain" over most of Malaysia, including the major palm oil producing states of Sabah, Johor and Pahang.

"They're worried about the wet weather which will bring down production," said a trader with a foreign commodities brokerage. "Although the ringgit is strong, the weather is the one that's affecting the market."

The monsoon season, which typically rolls in from November, may cause floods that disrupt harvesting and complicates the transportation of fresh fruit bunches to mills.

"This is a supply-driven rally," said another trader with a local commodities brokerage. "We're heading towards the months of November, December and January which produce thinner supply because of the monsoon and seasonal cycles," the trader added.

The benchmark January contract on the Bursa Malaysia Derivatives Exchange surged as high to 2,483 ringgit in late Monday trade, reversing losses from the morning session. Prices by the day's close settled at 2,460 ringgit ($786), a 0.8 percent gain.

Total traded volume stood at 36,495 lots of 25 tonnes each, marginally higher than the usual 35,000 lots.

The Malaysian ringgit raced to its highest in more than four months on Monday to trade at 3.1220 per dollar as the government steps in to tackle a worrying fiscal deficit attracted capital inflows.

A stronger ringgit makes palm feedstock expensive for overseas buyers and refiners.

Malaysia's plans to raise its biodiesel requirement to 7 percent palm oil, up from 5 percent, will see tighter stockpiles from next year if the policy is successfully implemented nationwide.

Reuters reported that the "B7" biodiesel blend could be mandatory from December as talks with interested parties were nearing a conclusion.

"We estimate that when B7 is fully implemented, it could raise the country's consumption of crude palm oil for biodiesel usage to 700,000 tonnes per annum," said CIMB analyst Ivy Ng in a note on Monday.

"This would represent an increase of 550,000 tonnes from Malaysia's current biodiesel consumption of 150,000 tonnes, and will be positive for crude palm oil prices from H2 2014 onwards," she added.

In other markets, Brent crude rose towards $108 a barrel on Monday, after three days of losses, amid expectations the U.S. Federal Reserve would maintain its economic stimulus at its policy meeting this week.

In competing vegetable oil markets, the U.S. soyoil contract for December rose 0.9 percent in late Asian trade. The most-active May soybean oil contract on the Dalian Commodities Exchange dropped 0.6 percent.

Palm, soy and crude oil prices at 1024 GMT
Contract	Month	Last	Change	Low	High	Volume
MY PALM OIL	NOV3	2470	+22.00	2453	2502	741
MY PALM OIL	DEC3	2470	+26.00	2428	2489	3143
MY PALM OIL	JAN4	2460	+19.00	2426	2483	20627
CHINA PALM OLEIN	MAY4	6084	-14.00	6062	6122	494162
CHINA SOYOIL	MAY4	7130	-40.00	7108	7144	449000
CBOT SOY OIL	DEC3	41.06	+0.33	40.73	41.21	7751
NYMEX CRUDE	DEC3	97.92	+0.07	97.50	98.05	13130

Palm oil prices in Malaysian ringgit per tonne
CBOT soy oil in U.S. cents per pound
Dalian soy oil and RBD palm olein in Chinese yuan per tonne
Crude in U.S. dollars per barrel

($1=3.13 Malaysian ringgit)