Palm edges up on U.S. dry weather outlook

SINGAPORE: Malaysian palm oil futures gained on Tuesday on
expectations of higher demand as dry U.S. weather could damage the
soybean crop further, tightening global edible oil supply. A victory by
pro-bailout parties in the Greek polls over the weekend appears to have
lessened the risk for a renewed financial crisis, sending palm oil
futures to close just below the RM2,900-mark on Monday. But as optimism
began to fade in financial markets, dry weather cues came into play as
the U.S. Department of Agriculture (USDA) said unfavourable weather had
damaged soybean crop quality. "Prices should remain positive with the
Greeks behind us. Dry weather in the U.S. Midwest also supports a
bullish stance," said a trader with a local commodities brokerage in
Malaysia.
By the midday break, benchmark September palm oil futures on the Bursa Malaysia
Derivatives Exchange gained 1.4% to RM2,940 (US$932) per tonne, after
rising as high as RM2,943. Traded volumes stood at 15,744 lots of 25
tonnes each, higher than the usual 12,500 lots. Palm oil technicals
were bearish as Reuters market analyst Wang Tao said prices would
revisit the June 14 low of RM2,838. But fundamentals remain supportive
as Malaysian palm oil exports recorded a double-digit jump for the June
1-15 period from a month ago, reflecting resilient demand ahead of the
Muslim fasting month starting in mid-July. Cargo surveyors will issue
exports data for June 1-20 on Wednesday. The USDA revealed dry weather
damage on Monday in its weekly crop report, saying 56 percent of
soybean crop was in good-to-excellent shape as of Sunday, down four
percentage points from the previous week. A lower soybean crop could
lead to a smaller supply of soybean oil, shifting demand to the cheaper
refined palm oil, which is trading at a steep discount of close to
$150. Brent crude steadied around $96 a barrel on Tuesday, staying
close to 16-month lows hit in the prior session, as Spain's rising
borrowing cost showed Europe is nowhere near resolving its debt crisis
that has hurt the outlook for fuel demand. In other vegetable oil
markets, U.S. soyoil for July delivery gained 1.5 percent. The most
active Jan 2013 soyoil contract on the Dalian commodity exchange edged
up 1.2 percent. "The elections in Greece provided some support, but the
main reason behind higher prices today was the dry weather in the
United States although the impact could be short term," said Huang Zhi
Qiang, an analyst with Guotai Junan Futures in Shanghai. - Reuters