Palm oil jumps as China demand rises

SINGAPORE: Palm oil rebounded from two straight weeks of losses on Monday on signs that demand in China is rising even as heavy rain reduces yields in Malaysia and Indonesia, the biggest producers of the commodity.

February-delivery futures rose 3.3% to 3,381 ringgit ($1,070) a tonne on the Malaysia Derivatives Exchange, the highest level since November 11. The price dropped 1.6% last week and 0.8% the week before.

Exports from Indonesia, the top producer, jumped 13% to 1.45 million tonne in October from a year ago, the Indonesian Palm Oil Association said on November 25. Shipments to China surged 25% to 215,900 tonne and sales to India climbed 24% to 596,600 tonne. The two countries are the biggest users.

“There are enough fundamentals to support prices,” Arhnue Tan, a senior plantation analyst at ECM Libra Capital Sdn, said by e-mail. “With the festive season coming up, and Malaysian supplies looking vulnerable, I think that crude palm oil prices will continue to be quite strong.”

Chinese demand picks up before the Lunar New Year, the biggest festival on the country’s calendar, when demand for food soars. The celebration will fall in early February next year. Malaysian palm oil output fell 1% to 14.3 million tonne in the first 10 months of the year, according to data from the Malaysian Palm Oil Board.

Output in Indonesia may decline to 21.8 million tonne, less than 22.5 million tonne forecast earlier, on lower yields, the China National Grain & Oils Information Center said, citing OilWorld, an industry publication.

Exports from Malaysia rose 19% to 1.32 million tonne in the first 25 days of November compared with the same period in October, Intertek said November 25. Shipments rose 25% to 1.36 million tonne, Societe Generale de Surveillance said.