Palm Oil Gains After USDA Cuts Global Soybean Inventory Estimate

Palm oil gained for the first time in five days after the U.S. government lowered forecasts for global soybean inventories, straining cooking oil supplies.

Inventories of soybeans in the U.S., the largest grower and exporter, were forecast to drop to 3.82 million metric tons before this year’s harvest, from 4.49 million tons estimated last month, the U.S. Department of Agriculture said yesterday. That will pare global reserves to 58.28 million tons before the next Northern Hemisphere harvest, down from a 60.1 million-ton estimate in December, and 60.2 million tons a year ago.

Futures for March-delivery climbed 1.2 percent to 3,694 ringgit ($1,209) a metric ton on theMalaysia Derivatives Exchange, the most in a week. The most-active contract fell to the lowest in more than two weeks yesterday.

“Supply situation continues to be tight for all the major vegetable oils and that’s a bullish factor for prices,” said Ankita Parekh, an analyst at Geojit Comtrade Ltd. in Mumbai. “We won’t be surprised to see palm oil reaching 4,000 ringgit in the next few days.”

Palm oil has surged 57 percent in the past six months on concern that global cooking-oil supplies may tighten because of weather disruptions to soybean crops in Argentina and oil-palm harvests in Indonesia and Malaysia. Soybean and palm oils are direct substitutes.

Malaysia’s ringgit rose to a 13-year high on speculation a rally in global stocks and the nation’s yield advantage will spur capital inflows into the region, making palm oil shipments more expensive for holders of other currencies.

Argentina Harvest

The soybean harvest in Argentina, the largest grower after the U.S. and Brazil, is forecast to drop 13 percent to about 48 million tons in the current year because of a lack of rainfall, Argentina’s soybean group Acsoja said Jan. 10.

“Concerns about the Argentine and Brazil crops still abound and weather needs to be watched closely,” said Parekh.

March-delivery soybean oil advanced as much as 0.8 percent to 58.34 cents a pound on the Chicago Board of Trade, extending a gain of 2.2 percent yesterday. Soybeans for March-delivery climbed 1.1 percent to $14.30 a bushel, the highest level in Chicago since July 2008.

Palm oil for September delivery on the Dalian Commodity Exchange gained 0.7 percent to 9,790 yuan ($1,484) a ton. Soybean oil for delivery in the same month climbed 0.8 percent to 10,556 yuan a ton.

CME Group Inc.’s March palm oil contract, pegged to the Malaysian benchmark price, advanced as much as 1.3 percent to $1,208 a ton and traded at 1,204.50 at 12:10 p.m. inSingapore.

(Source: http://www.bloomberg.com/news/2011-01-13/palm-oil-gains-after-usda-cuts-global-soybean-inventory-estimate.html)