Palm prices rise on strong demand and supply concerns, resulting in a weekly gain

The price of Malaysian palm oils futures rose for the third session in a row on Friday, reaching their highest level in almost three weeks. This was due to expectations that production would be weak in August, and an improving demand.

By midday, the benchmark palm oil contract on Bursa Derivatives Exchange for November delivery had gained 15 ringgit or 0.39% to 3,841 Ringgit ($877.34).

The contract gained 4.35% for the week, the biggest weekly gain since the end of May.

"The preliminary production figures for Aug. 1-20 by the Malaysian Palm Oil Association were not encouraging. We are not seeing double-digit increases in production," Paramalingam Supramaniam said, a director of Selangor broker Pelindung Bestari.

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He said that the plan was to increase the biodiesel mix to 40% by January, from the current level of 35%. The price would also be supported by the improved demand from China and India, the two largest buyers.

"We saw yesterday a great deal of interest from China, and they purchased a large amount of cargo for December. Yesterday, India was very active and bought a large amount of cargo. "It looks like the demand for Palm Oil is returning," said he.

Dalian's palm-oil contract rose 1.11% while the most active soyoil contract grew 0.19%. Chicago Board of Trade soyoil prices rose by 0.28%.

As they compete to gain a share of the global vegetable oil market, palm oil is affected as well by changes in prices in other oils.

Data from cargo surveyors Societe Generale de Surveillance, Intertek Testing Services, and AmSpec Agri Malaysia revealed that exports of Malaysian products containing palm oil for the period August 1-20 were down between 16.7% to 18.4% compared with a month ago.

(source: Reuters)