Palmettos end higher due to strong export demand and anticipation of lower output

The price of palm oil in Malaysia rose on Monday due to a stronger export demand and an expectation that production will be lower over the next few weeks.

At the close, the benchmark March palm oil contract on?the Bursa Derivatives exchange gained 55 ringgit (1.36%) to $4,091 ringgit (1,007.64 USD) per metric ton. The contract dropped 0.17% during the previous session.

David Ng, a trader at Kuala Lumpur's Iceberg X Sdn. Bhd., a trading firm, stated that the market closed higher due to the expectation of a weaker growth in output in the weeks ahead despite MPOB reporting increased stock levels.

Malaysian palm oil inventories soared in December to a near seven year high. They also breached the psychologically significant 3-million-metric-ton barrier, as the highest monthly production in eight years?outshone only a modest recovery in exports.

Exports of Malaysian Palm Oil Products for the period January 1-10 increased between 17.7% to 29.2% compared to a month ago, according cargo surveyors.

Dalian's palm oil contract grew by 0.93% while the most active soyoil contract increased by 0.3%. Chicago Board of Trade soyoil prices were up by 1.03%.

As palm oil competes to gain a share in the global vegetable oils industry, it tracks the price movements of competing edible oils.

After Iran claimed to have "total control" over the weekend violence, oil prices dropped. This eased some fears about supply from OPEC producers. Investors also weighed up efforts to resume Venezuelan oil exports.

Palm oil is less appealing as a feedstock for biodiesel due to the weaker crude oil futures.

Dorab Mistry, an industry analyst, said that Malaysian palm futures will likely remain under pressure until production levels down. This is because the output was higher than expected in Malaysia and this led to a 'buildup of inventories.

The dollar has strengthened by 0.25%, which makes palm more expensive to buyers who hold foreign currencies. ($1 = 4.0680 ringgit) Reporting and editing by Ashley Tang, Rashmi Anich, Sonia Cheema and Tasim Zahid

(source: Reuters)