Vegoils Palm snaps three days of losses on flood fears

Business & Markets 2013
Written by Reuters
Wednesday, 04 December 2013 14:11
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KUALA LUMPUR (Dec 4): Malaysian palm oil futures inched up on Wednesday,
snapping three straight days of losses
on concerns that the worsening monsoon floods in key palm-growing areas
would disrupt production of the tropical oil.
Heavy rain and thunderstorms that swept over parts of Malaysia in the last few
days have caused flooding in low-lying areas in Johor and Pahang that are
abundant with oil palm plantations.
Floods make harvesting and transportation of palm fruit to mills risky as roads
become inundated and plantation workers are
forced to evacuate.
Local media reported that nearly 9,000 people in both the states have been
evacuated so far. The monsoon season typically
begins in November and stretches out until end-March, but is the wettest from
end-November to February.
"Most of the weather forecasts are predicting heavy rains and floods," said a
trader with a foreign commodities brokerage.
"This means production is definitely going to drop in December," the Kuala
Lumpur-based trader added.
By midday break, the benchmark February contract on the Bursa Malaysia
Derivatives Exchange had edged up 0.5 percent to 2,629 ringgit ($816) per
tonne, with prices ranging between 2,619 ringitt and 2,635 ringgit.
Total traded volume stood at 7,969 lots of 25 tonnes, below the average 12,500
lots as some investors waited for more updates on the flood situation.
Technicals however, were bearish. Malaysian palm oil may edge down a little to
a support at 2,588 ringgit per tonne, driven by a wave c, Reuters market analyst Wang Tao said.
Firmer crude oil prices also provided some support for palm, as it made the tropical oil a more attractive option as a biodiesel feedstock.
Crude palm oil is increasingly used as a "green" additive to fossil fuels as it can cut costs and reduce environmentally damaging
emissions.
Brent crude climbed towards $113 a barrel on Wednesday, while the U.S. benchmark rose more than $1 to a five-week high
after news of the scheduled start of a key pipeline helping to relieve a supply bottleneck at the country's main oil storage hub.
In competing vegetable oil markets, the U.S. soyoil contract for December rose 0.3 percent in early Asian trade. The most active May
soybean oil contract on the Dalian Commodities Exchange fell 0.5 percent.
Palm, soy and crude oil prices at 0554 GMT
Contract Month Last Change Low High Volume
MY PALM OIL DEC3 2586 +15.00 2580 2586 19 MY PALM OIL JAN4 2619 +12.00 2610 2625 836
MY PALM OIL FEB4 2629 +12.00 2619 2635 4405
CHINA PALM OLEIN MAY4 6246 -8.00 6202 6260 404570
CHINA SOYOIL MAY4 7258 -36.00 7240 7266 464950
CBOT SOY OIL JAN4 40.18 +0.08 40.10 40.25 2929
NYMEX CRUDE JAN4 97.20 +1.16 96.75 97.39 13098
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=3.22 Malaysian ringgit)