Palm prices jump over 2% due to low inventories and expectations of low output

After two sessions of declines, the price of Malaysian palm oils futures increased by more than 2%, boosted by expectations that palm production will be reduced and inventories in Malaysia will be low.

The benchmark contract for palm oil delivery in January on the Bursa Derivatives exchange gained 108 Ringgit or 2.38% to 4,637 Ringgit ($1,060.86) per metric ton.

David Ng is a proprietary trader with Kuala Lumpur's Iceberg X Sdn. Bhd. He said that the palm oil futures are higher because of expectations for weaker output and lower stocks in the country. This demand is also supported by a strong market.

Dalian's palm oil contract, which is the most active contract, rose by 0.15% while soyoil prices fell by 1.02%. Chicago Board of Trade soyoil prices were up by 1.64%.

As palm oil competes to gain a share in the global vegetable oils industry, it tracks prices of competing edible oils.

Oil prices climbed after falling 6% the previous session. A U.S. plan for buying oil to be used in the Strategic Petroleum Reserve provided some support. However, concerns about a weaker demand in the future also exerted pressure.

Palm oil is a better option as a biodiesel feedstock because crude oil futures are stronger.

Palm's currency, the ringgit (the palm-traded currency), fell 0.3% in value against the U.S. Dollar, making the commodity more affordable for buyers with foreign currencies.

(source: Reuters)