Palm Oil Ends 2010 at Highest in 15 Years on Vegetable Oil Supply Outlook

Palm oil futures advanced, ending 2010 at the highest annual closing price in at least 15 years, on concern global supplies of cooking oils will tighten after rains disrupted harvesting in Indonesia and Malaysia. 

 

The March-delivery contract gained 1.5 percent to 3,788 ringgit ($1,230) a metric ton on the Malaysia Derivatives Exchange. The most-active contract rose 42 percent this year, the second straight annual increase, and ended at the highest since at least 1995, according to Bloomberg data. 

Futures on Dec. 28 gained to 3,792 ringgit, the highest level since March 2008, amid concern that the supply of cooking oils may tighten as dry weather in Argentina hurt the crop in the world’s largest producer of soybean oil, and after rains affected harvesting in Indonesia and Malaysia, the largest exporters of palm oil. 

“The overall trend is still up,” Donny Khor, a senior vice president at OSK Investment Bank Bhd., said by phone from Malaysia. The rally may be sustained next year as importers return to the market, he said. Trading is suspended tomorrow for a public holiday, according to a statement on the exchange website. 

A public holiday was declared after the nation’s football team won the 2010 AFF Suzuki Cup, Bernama reported, citing Prime Minister Najib Razak. 

Argentina’s soybean production may fall by 17 percent to as low as 43 million metric tons in the 2010-2011 harvest as a result of a drought caused by the La Nina weather phenomenon, research company Economia y Regiones said Dec. 28. 

Production Outlook

Production of palm oil around the world was forecast on Dec. 10 by the U.S. Department of Agriculture to rise 6.9 percent to 47.9 million tons this marketing year, from a year earlier. Global demand was estimated at 48.2 million tons, up from 44.7 million tons a year earlier, the U.S. agency said. 

Stockpiles of vegetable oils including palm oil, soybean oil, and rapeseed oil, are forecast to drop at the end of this season to a seven-year low, pushing prices higher across all markets, the Economic Research Service of the USDA said in a Dec. 13 report. 

World inventories of vegetable oils will equal 13.2 percent of demand in the 2010-2011 season, a “critically low level,” the United Nations’ Food & Agriculture Organization said in a November report. Source: Reuters