Palm oil gained to a record high in more than 33 months on a speculated supply shortage of cooking oils.
The prices jumped after the heavy rains in Indonesia and Malaysia damaged the crops there, which are the leading producers of palm oil.
March-delivery futures advanced 1.7 percent to 3,852 ringgit ($1,257) a metric ton on the Malaysia Derivatives Exchange, the highest closing level since March 6, 2008. Prices surged 42 percent in 2010, a second straight year of gains.
Palm oil futures have advanced 68 percent in the past six months amid concern that the supply of cooking oils may tighten as dry weather in Argentina hurt the crop in the top soybean-oil producer and rains affected oil-palm harvests in Indonesia and Malaysia.
Vegetable oil reserves are forecast to touch a seven- year low at the end of this season, according to the Economic Research Service of the U.S. Department of Agriculture, Bloomberg reports.
Production of palm oil in Malaysia declined to a five months low in November, stocks also reduced to a four months low.
La Nina in Argentina has also affected the soybean production of the country, it is supposed that the soybean production may even come down by 17 percent to 43 million tons.
Meanwhile US had a record output of the crop this season, but the hungry China is increasing its demand day by day.
China imported 5.3 million tons of soybeans in December last year; shipments for January and February are forecast at 5 million tons and 3.5 million tons. China imports 60 percent of soybean to their country.
March-delivery soybeans, which climbed 33.8 percent last year, fell as much as 0.8 percent to $13.9225 a bushel on the Chicago Board of Trade. Soybean oil for delivery in the same month dropped as much as 0.6 percent to 58.01 cents a pound and traded at 58.48 cents at 3:33 p.m. in Mumbai. The vegetable oil’s premium over palm oil narrowed to $33.40 a ton from $49.5 a ton on Dec. 31, according to Bloomberg data.
Vegetable Oil Market