S.American crop weather supports palm oil as markets fall

KUALA LUMPUR: Malaysian crude palm oil futures edged higher on Monday
as investors grew concerned over hot weather hurting the South American
soy crop, which could potentially limit global supplies of edible oil.
Gains
were limited on an emerging sell-off in Asian financial markets, driven
by worries of instability in the unpredictable state of North Korea and
its nuclear programme after the death of leader Kim Jong-il, announced
on Monday.
Traders said financial markets' focus on Kim Jong-il's
death could shift back to possible credit rating downgrades of several
European countries that could disrupt progress in resolving the debt
crisis and stall global economic growth.
"There is some spillover
from equities markets' downtrend into palm oil. Eventually, the market
will also have to turn back to its own fundamentals of slowing exports
and production," said a trader with a foreign commodities brokerage.
By the midday break, benchmark March palm oil futures on the Bursa Malaysia Derivatives Exchange were up 0.3 percent higher at 2,992 ringgit ($940) but off the level of 3,015 ringgit struck earlier.
Traded
volumes stood at 7,278 lots of 25 tonnes each, compared with the usual
12,500 lots on investor caution over the possible tensions in the Korean
peninsula and Europe downgrade fears.
Malaysia's weather office
raised its weather warning to orange, saying heavy rains would continue
until Thursday in parts of the key oil palm growing state of Johor that
accounts for almost a fifth of national output. Seasonally weaker
yields and monsoon rains in No.2 producer Malaysia have brought
production in the first fifteen days in December lower by 14.5 percent,
traders and planters said.
That signals overall production this
month will go well below the 14.8 percent decline seen in November,
possibly propping up prices that have fallen more than 21 percent so far
this year.
But exports from Malaysia are also falling as top
buyers slow orders before the year end, freeing up some space for palm
oil stocks that have started to tighten a little.
Cargo surveyors will report Dec. 1-20 export data on Tuesday.
Brent
crude futures fell below $103 on Monday, as the prospect of rising
tension on the Korean peninsula following the death of North Korean
leader Kim Jong-il pushed the U.S. dollar higher.
The higher U.S.
dollar weighed on U.S. soyoil for January delivery in Asian trade.
Initially the market traded in positive territory as dry weather in
parts of Brazil and Argentina raised concerns of tight supply.
The most active Sept 2012 soyoil contract on China's Dalian commodity exchange rose.- Reuters