Oil Palm Price on the rise

JAKARTA: Malaysian palm oil futures surged for a sixth day in a row to new 15-month highs on
Tuesday, bolstered by bullish analyst forecasts, a weakening ringgit and expectations recent dry weather and haze will curb crop output.
    By Tuesday's close, the benchmark December palm oil contract  on the Bursa Malaysia Derivatives (BMD) exchange was up 2.38 percent at 2,450 ringgit ($549.82) a tonne, after
dipping to as low as 2,352 ringitt during the morning session. 
    The benchmark touched 2,460 ringgit in the afternoon session, it's highest since June 2014.
    Traded volume stood at 72,597 lots of 25 tonnes each, roughly double the average 35,000 lots usually traded daily.
    "In the afternoon the spike came because of the news coming out of India," said a trader at a foreign commodities brokerage in Kuala Lumpur, referring to statements by leading analyst
James Fry at an industry conference in Mumbai.
    "When someone like James Fry who has been very bearish on
crude oil has suddenly turned bullish, people holding positions
take note."
    Crude palm oil (CPO) prices are likely to surge 40 percent
to $700 per tonne by mid-2016 as an El Nino weather event dents
output and as top producer Indonesia uses more palm-based
biodiesel, Fry said. 
    Prices are also being propped up by the recent weakening of
the ringgit, the trader said.
    "The Malaysian economy is still playing air walk, and
invariably when the ringgit weakens it affects the BMD, because
some people trade BMD to hedge their ringgit positions also."
    The depreciation of the ringgit, which has lost
nearly around 28 percent this year, makes palm cheaper for
offshore buyers, supporting demand and, subsequently, prices.
    Worries that El Nino, a warming of sea surface temperatures
which can lead to scorching temperatures in Asia and East
Africa, could weigh on crop yields in Asia also supported palm
prices.
    "The key now is production," a second trader said, referring
to impacts of the recent dry weather and haze on output of the
edible oil in the longer term.
    World palm oil output growth will be halved next year due to
the El Nino weather pattern, leading vegetable oil analyst
Thomas Mielke said late on Monday. 
    Meanwhile, palm oil imports by India, the world's top
importer of edible oils, are also expected to climb to record
levels in 2016, also as a result of dry weather, which is seen
restricting supplies, a veteran trader said on Monday.
 
    In competing vegetable oil markets, the U.S. December soyoil
contract was down 0.66 percent in late Asian trading,
while the most active January soybean oil contract on
the Dalian Commodity Exchange fell 1.36 percent.