October 23, 2013 / 11:23 AM / 4 years ago

VEGOILS-Palm oil surges to near 2-mth high as output seen falling

* Prices jump to Aug. 28 high of 2,485 rgt in late trade
    * Palm rises on news of dropping production-trader
    * Palm oil may retrace to 2,406 ringgit-technicals

    By Anuradha Raghu
    KUALA LUMPUR, Oct 23 (Reuters) - Malaysian palm oil futures
rose to their highest level in nearly two months on Wednesday,
recovering from the morning session losses, as investors banked
on estimates that output had started to seasonally slow in the
world's second-largest grower.
    Production traditionally rises in the second half of the
year and peaks only in October, before slowing down towards the
end of the year as palm oil trees rest and monsoon rains
complicate harvesting. 
    But a group of planters on Tuesday estimated output fell by
10.5 percent in the first 20 days of October, fuelling
expectations that end-stocks would stay below the two million
tonne mark this year despite earlier bearish forecasts warning
of surging stocks and production.
    Soyoil markets in the United States and China, typically
tracked by palm, also gained momentum in late trade, supporting
prices of the tropical oil. 
    The U.S. soyoil contract for December rose 0.4
percent in late Asian trade, while the most-active January
soybean oil contract on the Dalian Commodities Exchange
rose 0.2 percent.
    "The news about dropping production in October is the
reason," said a trader with a local commodities brokerage in
Kuala Lumpur. 
    The benchmark January contract on the Bursa
Malaysia Derivatives Exchange rose to 2,485 ringgit in late
trade, the highest since Aug. 28, before settling at 2,482
ringgit ($785) by Wednesday's close, a 1.1 percent climb. 
    That brought prices up 1.8 percent so far this year, their
first yearly rise since 2010.
    Total traded volume stood at 32,615 lots of 25 tonnes each,
slightly lower than the usual 35,000 lots. 
    The Malaysian ringgit earlier rose as much as 0.76
percent early Wednesday, curbing buying interest, but then eased
to 3.1650 in late trade as investors including macro funds took
profits amid jitters ahead of the 2014 budget due on Friday. 
    Exports of palm oil traditionally slows in the last quarter
of the year, traders say, as cold winter temperatures solidifies
the tropical oil and makes it less appealing to buyers such as
China, the world's second-largest importer. 
    But festive demand ahead of a major Chinese celebration at
end-January might keep exports up and eat into stocks. 
    "Normally towards winter demand will slow down. But during
winter is also when China might buy a lot ahead of the Lunar New
Year festival," said one trader. 
    But palm was pressured by falling crude oil prices, as it
shifts demand away from crude palm oil as an alternate biodiesel
    Brent crude slipped towards $109 a barrel on Wednesday on
rising inventories in China and expectations of a further
buildup in the United States, the world's top consumer.   
    Technicals were slightly bearish. Malaysian palm oil still
faces resistance at 2,449 ringgit per tonne, and may retrace to
2,406 ringgit, Reuters market analyst Wang Tao said.
  Palm, soy and crude oil prices at 1045 GMT
  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      NOV3    2488   +31.00    2440    2488     402
  MY PALM OIL      DEC3    2484   +24.00    2439    2484    6351
  MY PALM OIL      JAN4    2482   +27.00    2436    2485   15530
  CHINA PALM OLEIN MAY4    6178   +56.00    6110    6204  973574
  CHINA SOYOIL     MAY4    7216   +14.00    7152    7236  782212
  CBOT SOY OIL     DEC3   41.67    +0.15   41.25   41.75    5412
  NYMEX CRUDE      DEC3   96.75    -1.55   96.74   98.29   34212
  Palm oil prices in Malaysian ringgit per tonne
  CBOT soy oil in U.S. cents per pound
  Dalian soy oil and RBD palm olein in Chinese yuan per tonne
  Crude in U.S. dollars per barrel
 ($1=3.166 Malaysian ringgit)

 (Editing by James Jukwey)

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