Floods push up palm oil, rubber prices

BANGKOK: Rubber entered a bull market and palm oil headed for the longest run of gains in more than a decade as flooding across Malaysia and parts of Thailand hurt supplies of both commodities and forecasters predicted more rain.

Rubber for June delivery rallied 3.9% to 213.3 yen a kg (US$1,773 a tonne) on the Tokyo Commodity Exchange, the highest settlement since July 3. Futures rose 22% from a five-year low in October, meeting the threshold for a bull market with a gain of at least 20%. Palm oil climbed for a ninth day in Kuala Lumpur to head for the longest run of gains since 2002, according to data compiled by Bloomberg.

Heavy rains flooded parts of Malaysia and southern Thailand over the past two weeks, and Commodity Weather Group predicted the falls will continue for at least another week. Malaysia evacuated more than 200,000 people as of Monday amid the worst flooding in decades. Thailand is the world’s largest rubber exporter and neighbour Malaysia is the biggest shipper of palm oil after Indonesia, where some rubber exporters are in talks with buyers to reschedule shipments because of rains.

“Key growing areas are inundated,” said David Ng, a Kuala Lumpur-based derivatives specialist at Phillip Futures Sdn Bhd, referring to palm-growing estates in Malaysia. “Delayed harvesting activities and seasonally lower production will hamper yield levels in coming weeks.”

Palm oil for March delivery rose as much as 0.8% to RM2,305 a tonne on Bursa Malaysia Derivatives and traded at RM2,290 at 3:16 pm. The commodity climbed to RM2,308 on Monday, the highest level since Nov 4.

Some Indonesian rubber exporters are in talks with buyers to reschedule shipments, Rusdan Dalimunthe, executive director of the Rubber Association of Indonesia, or Gapkindo, said in a phone interview from Jakarta yesterday. Rubber production might drop 30% because of rain and floods, Dalimunthe said.

Rubber supplies in Thailand and Malaysia will contract by at least 100,000 tonnes a month if floods persist, International Rubber Consortium chief executive officer Yium Tavarolit said Monday. The group is the operating arm of the International Tripartite Rubber Council, which represents governments and exporters from Thailand, Indonesia and Malaysia.

Rubber futures rose 16% this quarter, the first advance since 2013, after Thailand, Indonesia and Malaysia took steps to shore up prices from the five-year low in October. Producer groups from the top suppliers pledged to refrain from selling below US$1.50 a kg. Three nations also agreed to cut exports from next year to drain supplies.

“Bad weather in Malaysia and Thailand boosted concern that supply may tighten,” Gu Jiong, analyst at commodity broker Yutaka Shoji, said by phone from Tokyo, referring to rubber.

In Malaysia, monsoon rains with strong winds are seen over Pahang, Perlis, Kedah, northern Perak, Kelantan, central and northern Terengganu, western Johor and Sabah, and are expected to continue until today, the Malaysian Meteorological Department said on its website. – Bloomberg